Last 10 years’ data suggests bulls took control over D-Street on Muhurat Trading

Kshitij Anand

Moneycontrol News

Let’s give a fresh start to our portfolio this Samvat year. Many of us may have made profits, while some may have just managed to break even. But, it is time to look at things from a different perspective.

Despite macro headwinds, Indian markets managed to hit record highs in the run-up to Diwali. Earnings growth still remain elusive and could come back to haunt us if it doesn’t catch up in Samvat 2074.

The S&P BSE Sensex completed its journey from near 28,000 to 32,000 in Samvat 2073 while Nifty50 rose nearly 1600 points or little over 18 percent in the same period.

Most analysts’ remain optimistic on Indian equity markets and expect Nifty to hit top Mount 11K and Sensex to inch closer to 40,000 in the next 12 months if earnings rebound and geopolitical environment stays stable.

Most equity markets across the globe remain shut while we trade for one hour known as the ‘Muhurat Hour’ trading. Muharat Trading is a special trading session for investors conducted by NSE and BSE on the auspicious occasion of Diwali.

This year, the Muhurat Trading session on account of Diwali Laxmi Pujan will commence from 06:15 PM (pre-open session) and regular trading will start from 06:30 PM to 07:30 PM. All trades executed in this Diwali Muhurat trading session shall result in settlement obligations.

Last 10 years’ data suggests indices haven’t done much in terms of return. But, in 7 out of 10 years, the S&P BSE Sensex closed in green. It rose as much as 5.8 percent in the year 2008 but since then the index failed to register even a 1 percent gain.

The index closed in negative in three out of 1o years. It fell marginally by 0.04 percent in the year 2016, it dropped by 0.28 percent in the year 2012, and it fell by 0.79 percent in the year 2007.

There are many stocks which show robust performance on the muhurat day. Last 10 years data suggests that investors’ prefer to buy small and midcap shares.

MIC Electronics gave 1-5 percent return on Muhurat Trading day while Meghmani Organics on an average gave 5 percent return in last 10 years on this very day.

Another stock Indraprastha Medical Corporation gave 1-2 percent return in last 10 years while NTC Industries on an average gave 4 percent return in the same period. It gave 5 percent return in 2016 and in the year 2015.

Morepen Labs gave 6 percent return on an average in the last 10 years on muhurat trading day. It rose by 2 percent in the year 2016, 13 percent in 2015 and 5 percent in 2014.

Small and midcap stocks remained in focus but investors should not overlook one basic trait that is valuation in conjunction with quantitative and qualitative aspects like financial ratios, balance sheet strength, pricing power, and competitive pressures, amongst others.

Indian markets look ripe to hit fresh record highs in the next 12 months but will it be able to repeat performance of 2017 (over 20% rally since Jan 2017) look tough.

Higher valuations and weak near-term earnings growth may moderate the returns in Samvat 2074, in comparison with last year.

“The Sensex may give moderate return in near term, but with financialisation of savings, government reforms, formalisation of economy post GST implementation, rural demand revival as well as lower interest rates, we expect equity as an asset class to continue outperforming other asset classes,” Teena Virmani, Vice President-PCG Research at Kotak Securities told Moneycontrol.

“There are near-term concerns over earnings and macros along with continued tensions between the US and North Korea. But, the economy has started witnessing uptick. Our technical team has given a target of 11,850 for Nifty and around 37,000-38,000 for Sensex,” said Virmani.

Also Watch: The story behind Muhurat Trading