Markets and Muhurat trading: How have Sensex and Nifty celebrated Diwali?

Diwali is just around the corner, and most traders and stockbrokers are gearing up for muhurat trading, which will take place on Friday, November 1 this year, between 6 and 7 pm. The one-hour trading session will mark the beginning of the new year in the Hindu calendar, or Samvat 2081.

Generally, markets don't see much trade or activity during this one-hour session, given that muhurat trading is largely symbolic. It stems from the Indian tradition of closing our annual financial accounts on the day of Diwali and then starting afresh with the upcoming new year.

Investors look to make their first profitable transaction of the new year and believe that any new investments during this one-hour window will bring them long-term prosperity. Like with usual trades, settlement happens on a T+1 basis.

Gaurav Garg, who heads the markets desk at Lemonn, a new-age stock trading app, explains that retail investors usually make symbolic purchases of small quantities of stocks or invest in blue-chip stocks or large-cap stocks as part of their portfolio-building strategy during muhurat trading.

"Here, it is less about immediate profits and more about its cultural and traditional aspects. The number of trades in this session also tends to be 20–30% lower, compared to a typical trading day, since institutional investors and high-frequency traders stay away from muhurat trading," he adds.

How has the market performed during muhurat trading in the past?

Much like us, the markets also put on a positive, festive outlook during this time. Data suggests that over 10 years, muhurat to muhurat returns, i.e., the performance of Nifty or Sensex from one Diwali muhurat to that of next year's, has averaged around 11-13%.

In fact, in the past decade, the average gain during muhurat trading has been approximately 0.5% to 1% on major indices.

Over the last 10 years, 8 out of 10 muhurat sessions have yielded positive returns for investors. In fact, four of these 8 sessions have delivered double-digit returns. Some of these outliers include 2021, i.e., at the peak of the COVID-19 pandemic, where Nifty’s muhurat-to-muhurat returns were a staggering 40.19%. Sensex closely followed suit with 37.65%.

2022 saw the returns from these indices slip into the reds, despite a positive muhurat day performance. While returns on Nifty slipped 1.04% in negative, Sensex was also down by 0.39%.

Year	Nifty Muhurat-to-Muhurat returns (in%)	Sensex Muhurat-to-Muhurat returns (in%)
2023	10.13	9.07
2022	-1.04	-0.39
2021	40.19	37.65
2017	18.21	15.96
2014	27.29	26.43

Source: Lemonn

Sectorally, consumer goods, automobiles, and financial services are sectors that do well during this time, benefiting from elevated consumer demand and festive momentum.

What can we expect this year?

So far, this hasn't been a great season. Corporate earnings have been disappointing, valuations are elevated, and foreign investors are exiting India at a breakneck speed. In October so far, FIIs (foreign institutional investors) have withdrawn a massive Rs 92,142.97 crore from Indian markets. Over the last 24 days, FIIs have functioned on a single aim—sell, sell, and sell. So, expect the markets to remain muted.

But, for those looking to get in the market in the long haul, experts note that this is a good opportunity to accumulate good-quality stocks. So, happy Diwali, and happy investing this festive season.