On Friday, the Bombay Stock Exchange will welcome Vikram Samvat 2064 with the decades-old tradition of an hour of trading. Brokers will make token buys at the Muhurat trading and worship the Hindu goddess of wealth, Lakshmi, to celebrate the beginning of the auspicious Hindu new year.
However, stock brokers are no longer as excited about the start of a new year of trading as they once were. Diwali is now just Diwali at the Bombay Stock Exchange (BSE). The Hindu new year seems to be slowly losing out to two other new years—the calendar year in January and the fiscal new year in April.
Foreign institutional investors (FIIs), who drive the Indian market, make investments based on market assessment and fund flows rather than auspiciousness. “Naturally, Mahurat trading has no significance now,” Krishna Kumar Karwa, managing director of Emkay Securities, a Mumbai-based brokerage says. “Some people do symbolic trades for old time’s sake. Apart from that, it is no longer significant.”
Traditionally, going to the exchange and participating in open outcry trading was part of the highlights of Diwali in Mumbai. But with screen-based trading replacing physical trades and market highs constantly tempting investors, the value of trading on Diwali has diminished.
Typically, BSE’s benchmark index, the 30-stock Sensex, would perform better post-Diwali than pre-Diwali. Since 2000, on three occasions out of seven, the Sensex rose in the two weeks preceding Diwali; in all seven years it rose after Diwali. This time around, the Sensex is up 8.54% in two weeks of trading in the run up to Diwali.
With the Sensex already up 36.7% this year, investors hardly need an auspicious occasion to invest.
Some domestic institutions may make token investments of Rs100 in the market on Friday. Offices of domestic and foreign institutions will remain closed and no business will be transacted.
“The sentimental value to Muhurat trading is always there,” says Deven Choksey, managing director of KR Choksey, a domestic brokerage. “But we don’t recommend that people trade that day because spreads are thin. FIIs and domestic investors do not participate, so volumes are low and transactions do not always go through smoothly.”
Even for retail investors the rising Sensex gives better reason to buy rather than the Muhurat. Retail investors are not too excited about this anymore, C.J. George, managing director of Geojit Financial Services Ltd, a domestic brokerage, says. “They like to buy when the market goes up and sell when it goes down.”
Naren Shah, who has been investing in the market for many decades, says he does not make investments on Diwali any more. But those who may have collected money as Diwali presents may buy stocks as the best way to invest, Shah adds.
Geojit’s George even suggests stopping the Muhurat trading altogether. “I think we should discontinue it because I don’t see the principle of trading for one hour on a day like this when people don’t even invest.”