Investors wishing to try their hand at stock-picking or trading in the Muhurat session this Wednesday have little to fear. It is a benign, please-all kind of a session where most investors just key in a token buy in their lucky stock.

“As Diwali also marks the beginning of the New Year, it is believed that Muhurat trading on this day brings wealth and prosperity throughout the year,” says Nikhil Kamath, Director, Trading & Risk – Zerodha.

This festive spirit is reflected in the fact that the Sensex has closed with gains in eight out of the last 10 Muhurat trading sessions.

The most dramatic session in recent times was in 2008. The Sensex had hit its nadir at 7,697 in the previous session, following the Lehman debacle.

But bulls charged with renewed frenzy in the Muhurat session on October 28, 2008, to lift the Sensex almost 6 per cent. That marked the end of one of the worst bear markets in recent times. Such intensity is, however, quite rare and the gains are usually between 0.2 and 0.7 per cent. As the stock market fraternity is superstitious, a negative close on the Diwali day is taken as a signal of a difficult year ahead. This played out in 2007.

After a multi-year bull-market that began in 2003, the Sensex scaled 20,000 in the early part of the Diwali week in 2007. Investors turned nervous at this milestone and the index lost 0.8 per cent in the Muhurat session that year. We all know what followed in 2008. The Sensex lost 0.3 per cent in 2012 too and investors had a rocky ride in the year that followed.

Key factors So what should investors do this Muhurat session? “Stocks are available at a discount post the Bihar poll debacle as also due to slowdown in earnings. A pick up in the economy with a boost from government spending as well as interest rate savings as banks transmit the rate cut, will raise the earnings growth trajectory,” says Ravi Shenoy, AVP-Midcaps Research, Motilal Oswal Securities Ltd. “Also, Nifty is now available at the same level at which it traded a year ago. Investors should, therefore, participate in this Diwali sale.”

“We do not expect any surprises this Muhurat session,” says Kamath. “Also investors should note that all trades will have settlement obligations.”

Many brokerages have been sending notes to their clients on the best buys this Diwali. This list features mainly large-cap names such as Maruti Suzuki, ICICI Bank and Reliance Industries. Most old-timers, however, have their lucky stock that they religiously buy every Diwali.

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