Why is Muhurat trading so popular? Learn about this auspicious stock market investment option

By Mr. Prabhakar Tiwari, CGO, Angel One Ltd

With the festive time of the year, both seasoned and new investors look forward to Muhurat Trading on the auspicious occasion of Diwali. It is a trading window that remains active for 60 minutes during Diwali’s evening hours. The traders have been observing this ritual for a long time, and it is believed that trading during the ‘muhurat‘ or auspicious hour brings prosperity and financial growth for the stakeholders.

What is Muhurat and Muhurat Trading?

Muhurat is a Hindi word that translates to ‘auspicious time’. As per Indian traditions, the time around Diwali puja is considered one of the most propitious periods for finances. Even though exchanges such as NSE and BSE designate the time of Muhurat trading each year, it generally coincides with the Diwali puja (held on the evening of the festival).

Muhurat trading is a ritual followed by traders around the country for more than 60 years. Traders prefer transacting on the market to gain prosperity and make fruitful investments. The tradition is unique to Indian markets only.

Reasons for the popularity of Muhurat trading

There are so many reasons, the festive spirit being one of them, which could be attributed to the popularity of muhurat trading. With a wide range of sub-divisions among cultures and beliefs in Indian society, there is a common understanding that Diwali is one of the best times to initiate new financial investments. Hence, investors and traders use this auspicious time to make token investments during Muhurat trading hour.

Muhurat Trading 2022 

 Investors can trade in all segments, including equity, derivatives, and SLB. The current year‘s pre-open session will begin at 6:00 PM and end at 6:08 PM. In addition, the matching timings on the muhurat trading session will be from 6:08 PM to 6:15 PM. Trade modification in the call auction will end at 7:45 PM.

It is vital to notice that all trades carried out during this time shall result in settlement obligations.

Dos and Don’ts   :  There is no strict list of dos and don’ts that ought to be followed by investors during the one-hour trading period. After all, the entire exercise’s purpose is based on people’s beliefs and sentiments. However, it is often advised to focus on long-term investments and make token investments during the period. Since this period is deemed auspicious, it gives a psychological advantage for new investors who wish to initiate their journey in the stock market.

Historically, the period has demonstrated bullish trends. Around 80% of the time, the markets ended up in green after completing the one-hour trading period. It could be attributed mainly to the market’s positive sentiments and the investors’ psyche.

Things to avoid during Muhurat Trading

As investors look forward to trading and investing during the auspicious period, it is essential not to get too carried away as the trends during the Muhurat trading might not reflect the long-term mood of the stock markets. Hence, making reckless investments and focussing on F&O based on the one-hour trends should be avoided. In addition, one must prevent rumours and heavy exposure in stocks and scrips.

Summing up

The uniqueness of Muhurat trading is restricted to the Indian stock exchanges; hence, investors are often excited about being part of the tradition. It is an age-old practice which is celebrated by exchanges and investors alike. In the festive spirit, it is always smart to make some investments during the auspicious period of trading decided by the exchanges in advance. However, it is also critical that an investor be aware of the fundamental market trends and avoid making rash decisions during Muhurat trading.