Stock markets on Diwali: What should you expect?

Kolkata, October 26: Stock market investors are hoping for some firecrackers this Diwali. On Diwali, there is a muharat trading session for an hour to celebrate the auspicious occasion. In 2018, gains in this session turned out to be good with the benchmark indices rallying to their best in ten years. 

“Looking at the kind of positive momentum the market is in, it seems to be a positive Muhurat session this time. Otherwise, prediction for a day is like tossing a coin or trying to gauge the mood of collective market participants, which is more speculative in nature rather than based on sound investing decision-based on facts,” says Paras Bothra, President of Equity Research at the Ashika Group of Companies. 

Bothra adds that from a Diwali to Diwali perspective, the market should be reasonably ok. “We will be in an economic uptrend by the time the next Diwali comes because a lot of the economic indicators as we see today is either hitting trough or closer to it, and hence the interest rate barometer is also reflecting the same, which is more of a lag indicators to economic performance.” 

He adds that pre Diwali, natural state of mind of the people generally remains uplifted on hopes of optimism and celebration, whatever the personal disposition of a person be whether good or bad. So the investor sentiment generally tends to be positive at varying degrees during the festive season. “But Mr Market doesn’t care about individual emotions, and has its own reason to reflect a tape which is more coloured with greed and fear for various reasons prevailing at the moment,” warns Bothra. 

Keep in mind: Best investments are made in worst of times and when there is fear, act against it with a rational mind. Fortune favours the brave but with a prepared mind. At this juncture, it seems to be incrementally favourable for buyers and the momentum in the market has been set right ever since the corporate tax cut has been announced. It seems that more reforms to come going forward and will keep the market buoyed.

Rebalance your portfolio: Quality stocks with growth potential and a reasonable valuation will be the right recipe for a good investment and wealth creation. Market at present is dissected into two category, 1>quality stocks at super high premium 2> non-quality or value stocks with a reasonable discount. Now this encompasses the whole gamut of the invest-able stocks. Now the real skill lies in allocation strategy in either investing in premium stocks with quality management or value stocks where there is risk of turning more valued in years to come. So this can be done either with sound knowledge of the company to invest in or best to invest through mutual funds. Rebalancing of portfolio depends on the investor profile, goals and tenure and taking into consideration the risk element attached to it.