Updated Mar 23, 2022
What is Muhurat Trading?
What is Muhurat Trading?
Introduction
In India, there are many festivals that are considered auspicious days for trading stocks and shares. This is because it is believed that these stocks will improve in health and the investor will get a better return on investment by trading these days. This is commonly seen during the festival of lights which is also called Diwali. During Diwali, stocks and shares are advertised and people are encouraged to invest in many of them.
This is what is known as Muhurat Trading. A muhurat is defined as the alignment of the planets which make people believe that good is coming. Diwali is considered a muhurat festival when it comes to the stock market and it is common to see many investors looking and monitoring the stock market during the ten days of this festival.
What is Muhurat Trading?
Muhurat trading or festival trading is a special time and comes only once a year. During these days only one hour is allotted to investors to put in their bids and buy stocks and shares. However, during this time, it is believed that the Goddess of Wealth “Laxmi” is looking over this exchange which means that the investor will have a better chance of earning in the coming year.
What is the History of Muhurat Trading?
In traditional times, stockbrokers generally started trading during the Diwali season. During the festivities a book prayer would be conducted to ensure that the Gods were aware that the trading was about to begin. This is when the muhurat starts. The primary traders were of Hindu origin, and believed that no money should enter the house during this time which is why they began to sell their shares as opposed to buying them. Today, this is just a symbolic gesture, but the trading goes on as normal.
What Happens During Muhurat Trading?
On Diwali, the National Stock Exchange and Bombay Stock Exchange allow investors and lenders to trade stocks and shares at certain hours. On a typical day the process is:
- Block Deal Session: This is where the trading is initiated when two parties agree to buy or sell a certain security.
- Pre-Open Session: This session is eight minutes where the stock exchanges determine the stock prices.
- Normal Market Session: This is the hour-long time slot when traders get to buy and sell stocks and shares.
- Call- Auction Session: This is when the remaining securities go into auction and the investors and lenders place their bids.
- Closing Session: This is the final eight minutes where investors place their final market order and buy the security they bid for.
Who Can Benefit from Muhurat Trading?
The Muhurat trading session is good for both investors and lenders. Since the volumes are high and the market is bullish, the festive spirit brings a positive outlook to the stock prices and people are more likely to trade during this hour in the hope of making a possible gain.
Muhurat trading also gives investors the chance to look for high performing companies and vice-versa. If the company has a solid investment plan, they can enter the stock market on Muhurat trading days, at first they can also do paper trading during this time if they are just starting out in the stock market as well.
Conclusion
Although muhurat trading may hold no real significance to the stock market, it is an important day for Indians. When it comes to this auspicious occasion, many people believe that the stars have aligned in their favour and are more willing to take risks and invest in stocks and shares. However, even during this time, it is important to look at the fundamentals of the stock market, and invest wisely rather than just going in any direction just because investors believe that a certain stock will get the wealth.
In muhurat trading, since the trading window is short, the decisions need to be made quickly by the investor. This can mean a more difficult decision for them to make as they have to choose between faith and actual numbers. Generally, the outcome is good, but that is not a reason to be careless and invest in all the shares in the market.
