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2 Oct, 2024
5 mins read
The festival of lights and prosperity is around the corner. Diwali is a major festival in India, well known for its rituals, customs, and traditions, including those associated with trading. One such belief culminates into what Indian traders call “Muhurat Trading”. Wondering what Muhurat trading is all about? Let’s take you through the history and significance of this form of trading, how to go about it and how it can benefit your trading account.
The festival of Diwali marks the start of the Hindu accounting new year, also called the “Samvat”.
Muhurat Trading is a one-hour trading session conducted by stock exchanges in India, such as the NSE and BSE, on the day of Diwali. The word Muhurat means "auspicious time”. Many believe that successful trading during this hour will bring good fortune and prosperity for the year ahead. It’s more than just a financial event—it's a blend of tradition and market participation with a festive spirit.
The exact date of Muhurat Trading changes each year. In 2024, it's scheduled to take place on the evening of 1st November, which coincides with Lakshmi Puja.
The session typically lasts one hour, but stock exchanges typically announce pre-market and post-market sessions before and after the event. Please watch for the exact exchange trading timings, which will be updated here shortly.
On Diwali, the Muhurat trading session is divided into the following segments:
Under this session, the engaged parties decide to buy or sell a security or asset at a static price. Then, they seal the deal by informing the stock exchange. The Block Deal Session lasts for 15 minutes.
The Pre-Open session lasts for 8 minutes. During this session, buy and sell orders are placed, and these prices determine the opening price of a stock.
The Normal Market Session is the main segment of Muhurat trading, and it lasts for one hour.
The call auction for illiquid securities will happen during the Muhurat trading session for 45 minutes during the Call Auction period.
The exchanges specify a closing session that usually lasts for 10 minutes.
Muhurat Trading isn’t a modern-day invention. This unique trading session has roots in ancient Indian tradition, when Diwali was viewed as a day of new beginnings, particularly for people from the business community and traders. On this day, accounts were balanced, and prayers were offered to Goddess Lakshmi, the deity of wealth and prosperity.
The tradition entered the stock markets to mark the importance of wealth creation in the modern era. The stock exchanges first formally recognised Muhurat Trading in the 1950s, which has continued yearly, regardless of market conditions. For many, it's a nostalgic reminder of Diwali’s role in financial planning and blessings for future gains.
The trading session is suitable for both first-timers and experienced traders. Some individuals participate in Muhurat trading due to the auspicious timing, even if they don't usually trade throughout the year. First-timers can find buyers and sellers easily, while experienced traders can take careful positions and benefit from the increased trading activity.
While this trading session can bear fruit, being cautious is essential. Here are some tips that could help you with the Muhurat Trading session for 2024.
Buy Well-Established Stocks: If you're looking to invest during this period, consider buying stocks of well-established companies known as Blue Chip stocks. These companies have a history of strong performance and stability. Buying shares of a reliable company could be an excellent way to participate in the Muhurat session without taking on too much risk.
Focus on Long-term Gains: Instead of trying to make quick profits, consider the long-term growth of your portfolio. Since Muhurat Trading is more symbolic, many seasoned investors buy and hold stocks they plan to keep for the year ahead, aligning their trades with their investment goals for the future.
Avoid Impulsive Trades: With the festive buzz, there’s a chance you might get swept up in the excitement and make impulsive decisions. Stick to your strategy and avoid trading purely based on emotions. Ensure that you’ve researched the stocks you’re interested in.
Keep an Eye on Market Trends: Even though this session is mainly ceremonial, it’s still crucial to stay aware of broader market trends. Sometimes, certain stocks may experience small price fluctuations, giving you a good opportunity to purchase shares at an advantageous price.
Limit Your Trading Activity: Since this session lasts just an hour and is more about the sentiment of the occasion, don’t feel pressured to engage in heavy trading. A token trade might be all you need to symbolically mark the occasion, and it can align with your long-term strategy. Make judicious use of trading rules like setting appropriate stop losses and using trading indicators to take well-informed trades.
Be aware of settlement and other obligations: All the open positions at the closing of this trading session will culminate into settlement and associated obligations. It is important to keep that in mind while trading.
Muhurat Trading in 2024 is an event that goes beyond just numbers on a screen. Whether you're an experienced trader or a newcomer, this one-hour session during Diwali can offer a chance to reflect on your financial goals for the upcoming year. Just remember to trade wisely, keep a long-term perspective, and enjoy the festive spirit that comes with it.
So, mark your calendars for November 1st this year and join the FYERS trading community in celebrating Diwali in the most auspicious way possible through Muhurat Trading!
The Muhurat Trading date for 2024 is the 1st of November.
Investing during Muhurat Trading is considered auspicious and is often a symbolic gesture for good fortune in the coming year. While it’s a great time to make small, long-term investments, it’s important to ensure your decisions align with your financial goals, not just the festive sentiment.
Futures and Options (F&O) trading is permitted during Muhurat Trading. However, trading volumes may be lower than usual, so it's advisable to trade cautiously, especially if executing derivative strategies.
Muhurat Trading follows regular market rules but is shorter, typically lasting about an hour. All major segments, including equities, F&O, and Commodity trading, are open, and the session includes pre-open, main market, and closing phases. Always check the announced timings for the specific year.
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