Diwali, the festival of lights, isn't just a time for celebration - it’s also a significant period for stock market activity in India. During this festive season, traders anticipate a positive shift in market sentiment, largely influenced by "Muhurat trading”, a symbolic and auspicious trading session.
Historical patterns show growth in sectors like FMCG, Gold, and Automobiles among others, especially during this festive period. These patterns make the Diwali period a great time for trading. For this reason, it is important for traders to be aware of such market patterns and apply them wisely on Diwali.
In this article, we shall discuss the typical market patterns seen around Diwali, which sectors tend to benefit, and how traders can strategically prepare to take advantage of these trends while managing risks effectively.
Historical Market Trends During Diwali
Diwali has historically seen positive trends in the Indian stock market, with many traders viewing it as an auspicious time to trade.
Considering the past ten years, the stock market returns were about 0.24% to 0.88% on average for the festive season around the Muhurat Trading, a special trading that takes place on Diwali.
For example, In 2023, during the Diwali Muhurat trading session, the BSE Sensex gained 355 points (approximately 0.55%) to close at 65,259.45. Similarly, in 2022, it jumped 524 points (around 0.88%) to settle at 59,831.66 during the Muhurat session. These gains are often driven by positive investor sentiment, increased consumer spending, and strong performances from sectors like FMCG, automobiles, and retail.
Nonetheless, a market is also open to volatility due to various factors such as international events or changes in commodity prices.
Traders ought to be aware that while the sentiment during the Diwali phase is usually of a bullish nature, it is wise to exercise caution as the markets are prone to short-term dips or fluctuations.
Key Market Fluctuations Around Diwali
During Diwali, the stock market experiences unique movements due to several factors. Here’s a breakdown of what typically causes these fluctuations:
1. Factors Driving Market Movements
Stock prices tend to fluctuate during Diwali because of heightened consumer spending and policy amendments.
Due to increased consumption of items such as Fast-Moving Consumer goods (FMCG), cars, and jewelry, the stock price of companies in these sectors increases.
On top of that, any major announcements from the Reserve Bank of India (RBI) around this time can also impact the market. Positive news usually boosts stocks, while negative updates can cause a dip, making Diwali a period of both opportunities and risks.
2. Global Economic Factors
Global economic factors like oil prices and the USD-INR exchange rate can heavily impact the Indian stock market during Diwali. Since India imports a lot of oil, rising oil prices can lead to higher costs, affecting companies' profits.
Also, changes in the exchange rate between the US dollar and Indian rupee can influence market movements.
Also, since the US market affects global trade, any major changes there during Diwali can create fluctuations in Indian stocks.
How Should Traders Gear Up for Diwali Season?
Here's a simple overview of what you should remember while trading during the Diwali Muhurat trading session.
1. Establish a Clear Plan
If you're planning to buy or sell during the special trading session, it's important to have a clear plan ready.
Decide on your goals, set target prices, and choose the stocks or assets you want to trade or invest in during the one-hour session.
A good plan will keep you focused and help you manage the market's ups and downs more easily.
2. Pick the Right Stocks
Not every stock is suitable for trading during the special session. It's important to pick the right ones for better chances of profit.
You can start by researching Muhurat trading stocks online. Also, check for things like volatility, liquidity, and trading volume before making any trades. This can help reduce potential risks.
3. Follow Risk Management
During the special Diwali share market session, it's important to have a solid risk management plan along with a clear Muhurat trading strategy.
This helps safeguard your trades from significant losses due to the high volatility during this time. For each trade, set a stop-loss to limit potential losses.
Also, consider using a limit order at your target price to automatically close your position and secure profits once the price is reached.
4. Avoid Placing Large Orders
Some traders try to take advantage of the festive mood by placing large buy or sell orders during the Muhurat trading session.
However, this approach is not advisable for a couple of reasons. First, the session lasts only an hour, which may not be enough time to complete big orders.
Also, there might not be enough liquidity in the market to handle such large transactions smoothly. Thus, try to keep Muhurat trading as an auspicious trading experience rather than treating it as a regular trading day.
Make the Most of the Diwali Season with A Trading App
The Muhurat trading will take place on November 1, 2024. To be ready, it's important to choose a trading app that offers excellent features. Here are some important features you should look at in the share market app beforehand:
Real-time Market Data & Alerts: Instant access to live stock prices, indices, and news updates to keep traders informed of market fluctuations during the festive season.
Advanced Technical Analysis Tools: In-built charting tools and indicators to analyze market trends and make data-driven decisions, especially for sectors like FMCG, Auto, and Banking.
Customizable Notifications: Alerts for significant market movements, stock-specific updates, and reminders for events like Muhurat Trading.
Muhurat Trading Support: Features that provide insights and facilitate trading during this auspicious one-hour window on Diwali day.
Seamless Transaction Processing: Instant buying and selling of stocks with minimal delay, ensuring traders can capitalize on rapid market movements.
Risk Management Tools: Access to stop-loss, take-profit, and other risk management features to safeguard investments during periods of volatility.
These features help traders stay on top of market trends and make smarter decisions during the busy Diwali season.
Conclusion
Diwali brings unique opportunities and challenges for traders due to market patterns and fluctuations. Understanding past trends and being prepared with the right tools are important for making smart decisions.
Traders should focus on key sectors, stay alert to market changes, and use trading apps that offer useful features like real-time data and insights. With careful planning and the right strategies, traders can make the most of the festive season for better returns.