In eight out of the last 10 years, the BSE Sensex has ended trading on mahurat day with positive returns—every Diwali, there is one hour of “auspicious” trading, also known as mahurat trading. So as Diwali approaches, there is not only excitement about buying new clothes, electronics, lights and crackers, but also a bit of anticipation about mahurat trading. The idea is to mark the beginning of the traditional financial new year (Samvat 2068) and Gujarati new year which begins a day after Diwali.
More often than not, benchmark indices have ended higher, albeit by a small margin. The time for trading is specified by the exchanges and usually happens for an hour. This year,mahurat trading will happen on 26 October between 4.45pm and 6.00pm.
Is it of any significance to you?
Usually brokers and traders indulge in mahurat trading and few investors venture into it. Those who do trade are divided on the objective; either they book intra-day profits and don’t carry forward trades or they may buy and hold. Some even have long-term buys in stocks which they combine to be a part of a portfolio.
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Says Ajay Parmar, head (institutional research), Emkay Global Financial Services Ltd, “There are only some clients interested in this; they too invest a token amount and usually hold the position for the entire year.”
History shows that there is little correlation between trading values on mahurat day and what happens after wards. For example, in 2001, the Sensex declined 1.8% on mahurat day and gained 7.73% a month later. But a decline is rare. Then, in 2008, the index gained nearly 6%, but in the month that followed gains were less than 1%. While these are extreme cases, even in other years, what happens during mahurat trading has little bearing on how the index moves in the days to follow.
Says Jayant Pai, vice-president, Parag Parikh Financial Services Ltd, “Among our clients, some trade during mahurat but mostly as a token and there is no real significance of that trade as it’s not indicative of what may happen on the next trading day.”
What should you do?
If you, too, want to make that token investment or experience some thrill on mahurat trading day, go ahead, but it is imperative that you base your buying decision on detailed research and fundamental attributes to build a long-term portfolio of shares.
Brokerages, too, have advice for you on index levels and specific stocks. Says Sahaj Agrawal, associate vice-president (derivatives), Kotak Securities Ltd, “Mahurat trading is expected to see a range of 4,900-5,000. Trade above 5,170 will confirm the uptrend in the index.”
For long-term investors, there is no real benefit in trading on mahurat day. Parmar feels that in recent years it’s become more a tradition than of any financial significance. The traditional aspect, too, is waning on account of online facilities, which reduces the need to meet in person. Moreover, keep in mind that equity investing is most effective in the long run. You’ll be better off sticking to your investment discipline (asset allocation), fundamental stock picking and long-term return objectives when it comes to investing in stocks.
Graphic by Yogesh Kumar; Illustration by Shyamal Banerjee/Mint