A positive Muhurat closing last Diwali didn't help the markets scale higher levels over the next one year. Though the 2010 Muhurat session saw the Sensex closing up by 0.5 per cent, the market has since headed steadily down and the index is now 19 per cent below its level last Diwali.
While the sentimental appeal of Muhurat trading may be fading, investors, both retail and institutional, don't plan to sit on the sidelines in the Diwali session as they believe the day could see some important price action.
Rising volumes
Volumes on the Muhurat day have been rising every year over the last few years. The Muhurat session of 2008 saw NSE register a turnover of Rs 1,557 crore.
This vaulted to Rs 3,806 crore in 2009. Last year's Muhurat trade was a record with a turnover of Rs 4,200 crore and traded quantity of 2,390 lakh shares, with participation both by foreign investors and domestic institutions, though retail investors still traded the most volumes. Foreign institutional investors, believed to be absent in Muhurat sessions, actually did a turnover of around Rs 650 crore on the day. The Muhurat session of 2010 also saw the Sensex hit its all-time closing high of 21,004 points.
Now, why do institutions trade on the shortened sessions? “No one wants to miss the action on Muhurat day,” says Mr Vikas Jain, Senior Manager- Product Development at Motilal Oswal Securities. He points out that this session has been witness to some key turning points in the market in recent years. “Muhurat-day trading has created three important tops and bottoms for Sensex in the last six years. The Sensex closing-high of 21,004 was recorded on Muhurat session of 2010. Earlier, in 2008 and 2005, Sensex touched its lows on the day before Muhurat”.
Selling too
From the numbers reported by Bombay Stock Exchange, it is obvious that the ‘sentimental' aspect to Muhurat trading, where investors earlier used to only punch in “Buy” trades, may be fading. There has been good amount of selling in the market in 2010 and 2009 sessions both from the retail and the institutional sides. While retail investors bought shares for Rs 1,476 crore last Muhurat session, they also put through sell orders worth Rs 1,452 crore. “It is the price level that is important, I can't exit Reliance Infrastructure or, for that matter, State Bank of India, at the price of last Muhurat now,” said a trader. The stocks are down 62 per cent and 44 per cent respectively from last Muhurat.
Interest for gold-ETFs
It is not just stocks that are attracting interest. Gold-ETFs have seen good buying activity on Muhurat days, says Ms Lakshmi Iyer, Head of Products and Fixed Income at Kotak Mutual Fund. Gold BeES — the largest gold- based ETF in the country — saw a turnover of Rs 1,031 lakh in Muhurat session of 2010 in NSE with 52,861 units being traded. That may not be purely sentiment based either, as gold ETFs have delivered a 30 per cent gain over the next one year.