Every year, on the auspicious occasion of Diwali, the Indian stock exchanges open just for a one-hour special trading session in the evening known as 'muhurat trading'. The word Muhurat itself stands for ‘auspicious’.
While markets are closed on Diwali, both BSE and NSE will conduct the Muhurat trading between 6:15 pm and 7:25 pm on Monday, October 24.
According to the Hindu calendar, Diwali marks the start of a new year (Samvat) and this session sets the tone for the upcoming year. The Muhurat trading session on October 24, 2022, will mark the beginning of Samvat 2079.
But should you buy in that one-hour window? If yes what should be your strategy?
Most analysts believe that investors should buy on Diwali day. According to them, since Muhurat trading marks a new beginning, it’s the right time to review your asset allocation and find out if your portfolio performing as per your financial goals and rebalance.
Since liquidity is very limited on the Muhurat trading day, it is not advisable to buy or sell a lot, but most investors especially new investors can get started by making token investments in stocks you are interested in, on this auspicious occasion.
However, it is important to not get influenced by the festival sentiments and invest only a small amount. In case you are confused regarding where to invest or what to buy, do consult your financial advisor.
Most brokerages have also come out with a number of top stock picks to help investors decide what to buy on Diwali day.
According to Anand James, Chief Market Strategist at Geojit Financial Services, there is often a lot of build-up to the Muhurat trading session, which results in equally strong follow-through trades in the subsequent day, prompting traders to take a careful look at how they approach these days.
"Now that volatility has eased considerably in the last few days, confirming that investors are comfortable with the 17,500 levels where we are at now. This is in stark contrast to just a week before when an attempt to scale 17430 was greeted by sharp long liquidation. This change in risk appetite for the better should encourage even those looking to book short-term profits, to hold on, for a new peak, shortly ahead," he noted.
With more than 50 percent of the NSE 500 stocks still below the 200-day moving average, there is great room for value picking, for those looking to start new investments on the auspicious day, advised the market expert.
Neeraj Chadawar, Head of Quantitative Equity Research, at Axis Securities also pointed out that Samvat 2079 now looks much brighter and more promising. The Indian economy stands in a sweet spot of growth and remains the land of stability against the backdrop of a volatile global economy.
He believes that the relative outperformance of the Indian market will likely sustain in Smavat 2079 as well and would be led by favorable macroeconomic factors and better-than-historical fundamentals of Indian corporates.
Factoring in all these economic and market developments, the Axis Securities prefers themes like banking, consumer, real estate, auto (especially commercial vehicles) and travel and tourism for this year's muhurat trading.
Based on these themes, Axis' top Diwali picks with a 1-year time horizon are: ITC, Ashok Leyland, Polycab, Sundaram Finance, Indian Hotels, IDFC First bank, Westlife development, NOCIL, and Aptus Value Housing.
Brokerage house Sharekhan also believes that there is certainly the potential for more volatility in the near term given global uncertainties. Nevertheless, Indian equities offer an attractive opportunity for investors on the back of growing conviction on a multi-year economic upcycle in India, it said. Corporate earnings are also likely to sustain the healthy momentum seen in the past eight consecutive quarters, added the brokerage.
It remains constructive on equity as an asset class and more so on the India growth story and advises investors to use the market volatility to construct a quality portfolio for long-term wealth creation. Its top picks for Muhurat trading include APL Apollo, Bajaj Finance, Bank of Baroda, Coforge, Devyani Intl, Eicher Motors, Greaves Cotton, HAL, ICICI Bank, ITC, Kirloskar Oil, L&T, Mahindra CIE, Sun Pharma and Titan.
Meanwhile, brokerage house ICICI Direct stated that its one-year forward, Nifty target is at 19,425 (21xFY24 EPS) with a sectoral bias towards banks, capital goods/infrastructure, autos, avoiding sectors having more global exposure like IT, oil & gas and metals.
"Going ahead, we believe Corporate India will likely deliver earnings growth in excess of 15 percent over the next two years given the current economic milieu and provide a plethora of investing opportunities in Indian markets. However, sticky global inflation will keep central banks hawkish and India will be no exception. Similar implications for global liquidity flows may create medium-term volatility in Indian markets. However, if such a scenario materialises, then the same will be a strong opportunity to take exposure to Indian equities, predicted the brokerage.
Given the scenario, it sees reasonable opportunities across the market spectrum with key filter being quality. It continues to advise investors to utilise equities as a key asset class for long-term wealth generation by investing in quality companies with strong earnings growth and visibility, stable cash flows, RoE and RoCE.
As per brokerage house Prabhudas Lilladher, Nifty overall has been moving within a range between 16,800 and 17,300 levels for quite some time with volatility on the rise and with a decisive breach above 17,300-17,350 zone would indicate some improvement in the overall bias and we can anticipate for further next target levels of 17,600 and 18,000 levels.
“At the same time, a decisive breach below 16,800 would weaken the bias further with the next targets of 16,600 and 16,300 levels. Overall, our Indian market has been outperforming the global markets as of now and we anticipate a decent rise in the next one year with targets of 20,500-21,000 anticipated since the last one year has been stagnant and with a breakout above 18,600 zone, at least 12-15 percent gain is expected,” it said.
The brokerage has also selected some of the promising stocks as Diwali Picks which on technical parameters have the strength and potential to yield decent returns in the next one-year time frame and which are also fundamentally well placed. It recommends buying and accumulating these stocks maintaining the support levels as mentioned in the report.