Stock exchanges are open every day of the week except on festivals and national holidays. However, the bourses are open on the auspicious day of Diwali or Deepavali for an hour, which is known as Muhurat trading for investors. Here’s all you need to know about the practice.
What is Muhurat trading?
Muhurat Trading is a specific block of trading period, when the stock exchanges are open on Diwali as it is considered an auspicious time for making investments and creating wealth. The muhurat trading window is open for slightly longer than an hour and is separated into different period blocks. The tradition is nearly five decades old.
On Diwali, the muhurat trading session is divided into the Block Deal session, the pre-open market session, the normal market session, the call auction session and the closing session. Most of the trading, and most of the investors, are active during the one hour-long normal market session when trading would happen as normal.
The session for this year's Muhurat trading window has been set from 6:15 pm to 7:15 pm as per notices from the BSE and NSE. Apart from equity trading and investment, other assets like derivatives, futures and options and securities can be traded and invested in during this period.
Why does Muhurat trading take place each year?
Diwali is one of the most auspicious times of the year for Hindus, who believe it to be the most opportune time to create and preserve wealth. Common practices on the day include buying gold jewellery, buying utensils and more. As the end goal of trading is to create wealth, the day is considered auspicious for trading and investing. Before the advent of electronic bourses, traders would commence the Hindu New Year on Diwali by settling accounts on the day.
What to keep in mind?
Muhurat Trading can be a good time to start investing in stocks. Given bullish sentiments of the festival of lights and extremely high trading volumes, it can be a good time for traders to profit using volatility in the market. Though investors should keep in mind that open positions at the end of the trading period are closed by brokers, much like intraday trading.
