November 14, 2012 6 Comments
The festival of Diwali is associated with Laxmi, the goddess of wealth; it is considered an auspicious time for spending and earning money. The customary trading tradition on the day of Diwali is unique to India where markets open for a short duration in the evening to pay obeisance to Lakshmi, the Hindu goddess of wealth and prosperity. This Muhurat Trading is a centuries old tradition. The day holds significance as it marks the beginning of the New Year, as per the Marwari tradition.Also the Gujarati new year begins a day after Diwali.
More often than not, the benchmark indices have ended higher, albeit by a small margin. The time for trading is specified by the exchanges and usually takes place for about an hour.This year,the Muhurat trading happened on 13 November between 3:30pm and 5:15pm.
Muhurat trading happens not only in stock markets but also commodity exchanges. Major commodity exchanges like MCX, NCDEX and others were open for trade from 5:30 pm to 8pm.
The tradition is to enter a trade on Diwali day as “using” money during this period is considered auspicious for prosperity. It is believed that Muhurat trading will bring in wealth and prosperity throughout the year. An auspicious beginning is thus made on the first day of the year.The objective can be to buy and hold stocks for the long term or book intra-day profits and not carry forward trades beyond this day. While it is mostly traders who trade in this special trading session, some investors also participate. However, retail investors mostly participate only with token amounts rather than any meaningful sum of money.Traders place token orders and buy stocks for their children, which are held for the long term and sometimes never sold. They normally book their intra-day profits, however small they may be.
It is believed that on the night of Lakshmi Puja, the Goddess comes to reside at the place of the puja. That is the reason why places of business including the Exchanges are kept lit all night on Diwali.
Historically, there is little correlation between returns on Muhurat day and what happens going forward. For example, last year, the index gained 0.2% on Muhurat day, but one month post that, it declined nearly 6.5%.
A little bit of luck,however, never hurt anybody,so I always make a token purchase on Muhurat day.It is a little illogical but What The Heck!Especially if they are stocks I have wished to buy for a long time and the price doesn’t look outrageous.