Fascinating Facts about Muhurat Trading

Muhurat is the most auspicious time of the day to do or start something. What about the most auspicious time to trade on the most auspicious of days, Diwali? That's what Muhurat trading is all about.

On the day of Diwali, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) opens briefly for a special session of trading. For avid traders, it is an integral part of their Diwali celebrations. For investors, too, an investment made during Muhurat trading holds special significance.

Steeped in Traditions

BSE institutionalised the tradition of Muhurat trading in 1957 with the special short- duration trading session. NSE started this tradition more than three decades later in 1992. Since then, Muhurat trading has been one of the special Diwali attractions for traders and investors.

The ringing of a special bell is another tradition associated with Muhurat trading.

The special bell is generally rung by a person of repute. The stock exchanges are adorned with floral decorations, while their floors are lit up with colourful rangoli patterns.

Most traders and investors worship the Goddess of Wealth, Lakshmi, during the time leading up to Muhurat trading. Hindus consider Goddess Lakshmi as the bearer of good fortune and prosperity. The outcome of Muhurat trading itself is seen as an indication of trading fortunes about to unfold in the year ahead.

Combining financial prowess with religious fervour

Muhurat Trading Practices

It must be mentioned that Muhurat day trading is generally considered to be a session of token investing and trading transactions. Therefore, the trading volumes during these sessions are comparatively low as most participants buy only token amounts of stock or trading positions.

Muhurat trading typically lasts for an hour, while the day depends on the Diwali dates. As Diwali celebrations do not follow the Gregorian calendar, Diwali and Muhurat trading date changes every year. BSE and NSE announces the timing of Muhurat trading in advance. The trades and transactions carried out during Muhurat trading are governed by the same rules and regulations of the Securities and Exchange Board of India (SEBI).

Since 2018, Sensex has witnessed a positive closing of 0.45% to 0.7% in the Muhurat trading session every year. Last year the BSE index had a near-flat closing of 0.04% at the end of Muhurat trading.

A trade for a positive Diwali day and a positive year ahead.

A Typical Muhurat Trading Day

Unlike a typical trading day, Muhurat trading doesn't follow the 9.15 am to 3.30 pm schedule. While the normal market session lasts for an hour, several other activities combine to give Muhurat trading a longer stint during Diwali day. Here are the various stages of Muhurat trading, along with the timings followed for the same during the last year's Muhurat trading.

A block deal session is the period during which two parties decide to buy and sell a significant volume of security for an agreed price. Consequently, they are also required to inform the stock exchange about it. Last year, the time slot for Muhurat trading was 5.45 pm to 6.00 pm, 24 October 2022.

• The pre-open session, last year, was an eight-minute slot from 6 pm to 6.08 pm. This session aims to seek the equilibrium price for the oncoming session.
• The normal market session is the actual trading session that lasts for an hour on Diwali day. Last year it lasted from 6.15 pm to 7.15 pm.
• A call auction session is 45 minutes earmarked for the trading of illiquid securities. The call auction session timing last year was 6.20 pm to 7.05 pm.
• The closing session is a 10-minute window during which you can place orders at the closing price.
• The closing session timing last year was 7.25 pm to 7.35 pm.

Muhurat Trading Factors You Must Keep In Mind

As mentioned earlier, Muhurat Trading has seen a positive response in the last few years. However, it doesn't mean that you get a God-bestowed golden touch for the day. It is like any other regular trading session and your Muhurat trades may still fall flat. And you wouldn't want to incur a loss on the auspicious occasion of Diwali.

• Follow your method - Whether it is fundamental analysis or technical, or both - follow your tried and tested trading modus operandi.
• Pick securities wisely - Remember that the session lasts only for an hour. You should identify stocks that garner high trading volume so that you get sufficient liquidity in your trade.
• Volatility - It is a session where everyone is in a hurry to close positions, and there isn't sufficient time for a trend to emerge. You must, therefore, take the possibility of high market volatility into consideration.
• Trading basics - Needless to say, you must keep the support and resistance level of your invested stock. You must be alert to close your position timely and put a stop-loss at the right place of the candlestick.

Light the Diya, but don't forget the candlesticks!

Wait For Your Muhurat

Muhurat means an auspicious moment, and your personal muhurat may not necessarily be during the muhurat trading hour. It is an hour of frantic excitement and you should experience it first-hand. But keep the much-needed poise in your trading decisions as you dive into Muhurat trading. It will help you to come out with a positive trading result and make your Diwali celebrations even more joyous.