Muhurat Trading: What is Muhurat Trading?

By Angel Broking | Published on 6th November 2020 | 283

Muhurat Trading: What is Muhurat Trading?

The festival of light is just around the corner. Diwali is one of the major festivals of India, and it also marks the beginning of the Hindu financial year. Like every year, Indian bourses have organised a special trading session to celebrate the event. Stock traders and investors are gearing up for this year’s muhurat trading, which will take place on the day of Diwali.

On the day of Diwali, Indian bourses arrange a special trading session during the special hours of Laxmi Poojan which they called muhurat trading. The special trading window opens following Hindu Panchang during the auspicious hours of the day when traders and investors buy and sell securities.

Diwali marks the beginning of the Hindu accounting year. Special rituals include worshipping account books and cash chest by the Gujaratis and Marwari communities of India. Stockbrokers perform Chopra Pooja or worshipping the account books before the customary Muhurat Trading begins. They believe if they make a good business on this day, they will have a good year ahead.

This year BSE and NSE have organised muhurat trading between 6:15 and 7:15 pm on Saturday, November 14. 

Samvat trading is a very important tradition followed by the Indian exchanges. So, let’s find out: what is muhurat trading and how to trade in it?

What Is Muhurat Trading?

Muhurat is a Hindi word, which means auspicious time, calculated based on favourable alignments of planets and stars. Muhurats are important to Hindu astrology. For a long time stock exchanges in India are organising muhurat trading. It is a yearly ritual that everyone looks forward.

Muhurat trading usually happens in the evening. Stock exchanges announce special one-hour trading session during which Hindu traders and investors engage in buying and selling of stocks to mark the beginning of a new financial year.  They believe it brings them good luck and prosperity throughout the year. 

Muhurat Trading Time and Details For 2020

The exchanges announce samvat trading date and time in advance. In 2020, samvat trading is going to happen on November 14. 

Here is the schedule for the session.

Muhurat trading will happen between 6:15 and 7:15 pm. Here is the breakdown of different events that are going to take place.  

  • Block deal session: 5:45 pm to 6:00 pm
  • Pre-open session: 6:00 pm to 6:08 pm 
  • Normal market: 6:15 pm to 7:15 pm 
  • Call auction illiquid session: 6:15 pm to 7:15 pm
  • Cut-off time: : 6:15 pm to 7:40 pm
  • Closing session: 7:20 pm to 7:30 pm  

Muhurat Trading Is Nearly A Half A Century Old Tradition 

On the day of Diwali Goddess Laxmi is worshipped in many houses across India. According to Hindu beliefs, Goddess  Laxmi is the goddess of wealth and prosperity.  They consider it auspicious to engage in financial deals on this day.

Muhurat trading started in the Indian bourses nearly half a century back. Bombay Stock Exchange organised it for the first time in 1957. NSE and other exchanges then continued the legacy, and muhurat trading started in NSE in 1992. 

The day is of immense significance for the Gujarati and Marwari communities in India, the two most influential business communities.  The session marks Samvat or the new year for them. They close the old ledgers and open the new ones. Many people engage in stock trading and investment during samvat trading. The special Diwali trading session lasts for an hour, and the market remains closed the next day. 

Data Shows Indices Stay Bullish on Diwali

General positivity keeps the market trend strong during muhurat trading. On the last fifteen years, the BSE index managed to stay robust on eleven instances. Historically, the market movement remained positive during the special trading hours, and also the stocks had been less volatile. 

Last year, BSE 30-share SENSEX climbed 0.7 percent during the special trading window to finish at 35,237 points. 

How To Prepare For Muhurat Trading 

Want to engage in muhurat trading but don’t know how? Prepare yourself to participate in this year’s muhurat trading with the following tips.

The general rules of trading also apply to muhurat trading. Trading stocks always carry risk. So, don’t dive without judging the outcomes. Trade like a smart trader and follow the tips below.

Shortlist stocks: Even before the spot trading starts, shortlist stocks that you want to buy. The trading session lasts only for an hour, so be mindful of what you are going to trade. Some traders choose the occasion to buy stocks they are going to hold for the long term.  So, be prepared with a list of securities you want to trade during the auspicious hour of Diwali. 

Do homework: Once you are ready with your list of stocks, check the technical indicators to determine the price trends. Based on historical data and market momentum, you can choose the best time to trade those stocks.  

How To Take Advantage Of Samvat Trading 

Be prepared to take advantage of muhurat trading. If you are a new trader, make up your mind to strike the best deal on a special occasion. Here are some ways to benefit from muhurat trading.

Make the first trade: If you are new to the market kickstart your investor’s journey on this day. However, we suggest you play conservatively. Invest a small amount in one or two stocks, and then follow their movement for a week or month. Once you grow confident, gradually scale up your investor’s game.    

Advance with the bullish market: Usually, the market remains bullish on this day – a good omen if you are an intraday trader. You can book a profit from stock price appreciation and close the position before the trading ends.

The Bottom Line

Now you know what muhurat trading is, go ahead and start trading. Also, It could be the perfect time to rethink your trading strategy or implement a new one. Once you have done the homework, you are ready to make good trades during the muhurat trading hour.

This year is different for many reasons. Let us now see how the market reacts on the day of muhurat trading.