The Sensex spiked 336 points in the early part of Samvat 2076’s Muhurat session, but closed just 0.5 per cent higher. But this may not provide any signal as far as the trading for the week following Diwali goes.

The Muhurat session, albeit considered an auspicious start to the trading year, mostly sees abysmal volumes. Traders usually put in token trades to usher in the New Year.

In the last 18 years, the Sensex has recorded negative closes in just three years. But gains in most years have been less than 1 per cent. The three exceptional years were — 2008, 2002 and 2001— when the index spiked by 5.9, 1.2 and 1.3 per cent, respectively.

But what does Samvat 2076 hold for traders? Does the past data reveal much about the trends in the opening week? Sadly, there is no good news. The data of the last 18 years, do not reveal any trend. The index gave positive weekly returns in 10 out of 18 years.

This works out to a probability of 56 per cent.

The highest gain was obviously in the year 2008, following the market crash triggered by the sub-prime mortgage crisis and the Lehman Brothers’ collapse. The index surged by 17.5 per cent in the week after the 2008 Muhurat session.

Post-Diwali trend

There is no trend in the trading following the Muhurat session either, going by the trading data since 2001. The Sensex recorded positive close in the week after Diwali in 10 out of 18 years.

Returns in the week after Diwali were higher in the pre-2008 period — with more years witnessing returns over 2 per cent. After 2009, Sensex traded flat or gave negative returns in the week following the Muhurat session, for five consecutive years.

The 2014’s Muhurat session bucked the trend — with a 4.2 per cent weekly return thanks to the euphoria induced by the Modi win in the General Election that year. However, the index traded flat in 2015 and 2018, while 2016 saw a negative 1.5 per cent weekly return.

Pre-Diwali euphoria?

Pre-Diwali rally was a norm in the Indian markets prior to 2000. But with foreign investors gaining dominance, this is no more the case. The Sensex has failed to gain in the week leading to Diwali in 9 out of the last 19 years.

The prelude to 2019’s Muhurat session was also quite dull — the index saw negative return of 0.6 per cent.

We tried analysing if the week prior to Diwali helped arrive at any conclusion. Here’s what we found.

The index gave negative returns (just as in 2019) during the pre-Diwali week in eight years. Of these only two years saw the negative trend continue in the post-Diwali week as well. In the other six years, the returns were positive in the post-Diwali week.

In probability terms, this could mean a 75 per cent chance of witnessing a positive weekly return in the opening week of Samvat 2076. However, this could be true, only if the past were entirely indicative of the future — which is definitely not the case with the markets.