At 6.15 pm today, Muhurat trading on stock bourses will mark the beginning of Samvat 2076. It is the day when stock exchanges in India, in a decades old tradition, open up for one-hour auspicious trading session, where traders and investors make token stock purchases in an otherwise thin and mostly range-bound session.
Here's all you need to know about the Muhurat trading:
What is Muhurat trading?
The concept of Muhurat trading is unique to India. It was first started in 1957 on the BSE and later in 1992 on the NSE, the same year the exchange was incorporated. The trading session is symbolic of the beginning of the new Hindu year on the day of Diwali.
"It is believed that trading on Muhurat day yields a good return for the rest of the year, since it is an auspicious time to start anything new," says Hemang Kapasi, Portfolio Manager - Equity, Sanctum Wealth Management.
What is Chopda puja?
For Gujaratis and Marwaris, the new financial year begins on Diwali. Old account books are closed and new ones are opened as the new Samvat begins. The accounting books are called Chopda. While accounting books have now been digitised, stockbrokers still perform Chopda puja, that is, they worship account books before the customary Muhurat trading. Broking houses are decorated, with lights lit up, as brokers along with families gather together for the Lakshmi puja, the Goddess of prosperity.
How has market performed on Muhurat trading days?
In the last ten years since 2009, the benchmark Nifty50 has not even once returned more than 1 per cent on Muhurat trading. However, in 2008, the index surged over 6 per cent.
What should you keep in mind?
As you prepare for the Muhurat trading, Kapasi warned investors not to buy stocks for sake of it. A thorough research is a must, he said.
"Although this day has mostly proven to be good for all traders, it is still advisable to invest with sound research and analysis to kick start the New Year."
G Chokkalingam, Founder of Equinomics Research & Advisory said: "This Diwali, investors should take a pledge not to act on "free" market tips to invest their precious savings. One must do own research and keep a track of management quality, debt level stress, working capital and must seek valuation comfort," he said.
Most importantly, Chokkalingam advised investors to avoid stocks of companies whose promoters have pledged more than one-third of their personal holdings.
Stock exchanges will remain closed on October 28 on the occasion of Diwali Balipratipada.