Muhurat Trading 2023: Significance and Guidelines

Diwali holds special significance for investors and traders in the stock market, thanks to the age-old tradition of Muhurat Trading. During Diwali, traders eagerly participate in Muhurat Trading, a unique one-hour trading window that is considered auspicious, with hopes of a prosperous trading year ahead.

What is Muhurat Trading? 

In Hindu astrology, a Muhurat is considered an auspicious time for commencing something new.  On Diwali, the Hindu calendar marks the beginning of the new year, making Muhurat Trading a symbolic start for potential good returns. On the day of Diwali, Indian stock exchanges remain closed, but this one-hour session opens up for Muhurat Trading. In 2023, Muhurat Trading is scheduled for November 12, 2023.

Typically, stock exchanges in India operate from 9:15 AM to 3:30 PM. However, on Diwali, they open only for an hour during Muhurat trading, which consists of several segments:

1. Block-deal session: In this session, buyers and sellers agree to trade securities at a fixed price and report it to the exchange.
2. Pre-opening session: A brief eight-minute session to determine the equilibrium price.
3. Muhurat trading session: The main one-hour trading session where regular trading activities occur.
4. Call Auction session: A segment designed for trading illiquid securities.
5. Closing session: Traders can place orders at the closing price during this session and settle the trades.

History of Muhurat Trading 

In India, the business and trading communities consider Diwali as the start of the new year. They open new accounts and settle the previous year’s financial records on this day. A significant tradition is the Chopra Pujan, where traders worship their books and seek Goddess Laxmi’s blessings for prosperity and success. 

The tradition of Muhurat Trading started in 1957 with the Bombay Stock Exchange and later extended to the National Stock Exchange in 1992. It has now evolved into a symbolic event for individual traders.

Muhurat Trading in 2023

In 2023, Muhurat Trading will take place on November 12, 2023. The trading in the equity and equity derivative segment will begin at 6:15 PM and end an hour later at 7:15 PM.

The trades executed during this session are settled on the same day. There are 15-minute pre-opening and closing sessions for trade settlement.

BSE/NSE Muhurat Trading Timings in 2023

Significance of Muhurat Trading 

Muhurat Trading is a preferred activity among traders, as it’s believed to bring forth a bullish market with substantial trading volumes. This special trading session is open to both novices and experienced traders.

It carries the potential to influence the market significantly. Historical data also indicate that investors have generally witnessed favourable outcomes in the BSE Sensex special sessions, as the index closed higher in seven out of the last 10 such instances.

In the most recent two Muhurat Trading sessions, both Sensex and Nifty displayed positive performance on the auspicious trading day. In 2022, both indices saw gains of 0.88% each during Muhurat trading, and in the preceding year, 2021, they recorded increases of 0.49% each.

However, given the volatility of the stock market, it’s advisable to seek expert advice, monitor stock performances, and formulate a solid trading strategy before participating. It’s important to understand that Muhurat trading isn’t solely about making profits; many participants engage in it due to its auspicious nature.

Things To Consider Before Considering Muhurat Trading 

1. Settlement Obligations: Be aware that all open positions at the end of the Muhurat Trading session will result in settlement obligations.
2. Date and Holiday: The Muhurat Trading session is scheduled for November 12, 2023. Keep in mind that November 12 is a holiday for Laxmi Pujan, and the market will only be open for one hour during the Muhurat Trading session.
3. Volatile Markets: During Muhurat Trading, market behaviour can be unpredictable and volatile. As a day trader, consider closely monitoring resistance and support levels to make informed trading decisions.
4. Stick to Fundamentals: Amid the excitement of Muhurat Trading, rumours can spread quickly. Ensure that you base your investment decisions on a company’s fundamentals. Stay committed to your investment plan and assess your risk tolerance.
5. Trading Volumes: If you intend to capitalise on market volatility, choose stocks with good trading volumes. The Muhurat Trading window is limited to just one hour, so liquidity is essential for efficient trading.
6. No Guaranteed Returns: Remember that investing during Muhurat Trading does not guarantee future returns. Even if a stock performs well on Diwali, its future performance will depend on fundamental factors and macroeconomic conditions. Invest wisely

Muhurat Trading on Diwali is a cherished tradition in India, symbolising the start of a new financial year and an auspicious time for trading and investment decisions. While it carries historical significance, it’s essential to approach it with a well-informed strategy and expert advice, given the unpredictable nature of the stock market.

Disclaimer: This article has been written for educational purposes only. The securities quoted are only examples and not recommendations.