Muhurat Trading 2022: What should be your stock-picking strategy on Monday? | Mint – Mint

Stock market strategy by Nikhil Kamath, Co-founder, True Beacon, & Zerodha for Diwali Muhurat Trading 2022

1. 5 investment themes for Muhurat Trading

Banks – Healthy outlook on credit growth and reducing concerns on asset quality might lead to an increase in profitability for the banks.

Automobiles – The entire auto industry is expected to see a 7% CAGR growth due to increased demand for cars/trucks, and the government’s increased focus on infrastructure. This FY, Nifty Auto is over 20% up year to date mainly because of better growth due to favourable base and falling input prices leading to margin improvement.

Housing – Residential property prices in India are on an upward trajectory. Housing supply in the previous quarter reached a seven-year-high. So, realty stocks can also be considered in this Muhurat buying session.

Gold – Indians are known to buy gold during the festive season. And it is also widely used as a hedge against inflation/currency risks. Banks offer gold ETFs and Government sovereign gold bonds – good opportunities for people looking to diversify their portfolios.

Index funds – Indian markets have shown great resilience so far and are surely among the top investible avenues for foreign investors. People can invest in index funds if they have a similar opinion and don’t want to invest in multiple stocks.

2. Why should investors invest in Muhurat trading?

Muhurat trading holds sentimental value (given it’s a ritual) in our country, and it depends on individual investors and their beliefs to trade during this time. As per data from Koyfin, Nifty’s returns have ranged from -3% to 39% (Diwali x to Diwali x+1) over the last 7 years. So, there is no concrete evidence of uniform returns on investments made during Diwali.

Muhurat trading is a regular practice carried out by Indian investors and people who usually buy stocks for the long term since they believe that any financial activity performed on this day during Diwali brings wealth, prosperity, and success.

3. What should be the stock-picking strategy?

During Muhurat trading hours, since people believe in investing for the long term, it is recommended to consider the prevailing macroeconomic conditions and invest in companies with good earnings, fundamentals, management, etc.

4. Top sectors to bet on Muhurat trading, factors to keep in mind when considering Muhurat trading.

If you’re an investor who prefers to be part of this tradition, deploying a fraction of your capital to buy stocks based on the current market conditions would be wise. Considering the current demand and market conditions, a few investible sectors would probably be Banking, FMCG, Auto and Realty.

Stock market strategy by Kanika Agarrwal, Co-founder, Upside AI for Diwali Muhurat Trading 2022

1. 5 investment themes for Muhurat Trading

The macro headwinds have been talked about by every expert in every form of media in the world! Therefore, Buffett’s maxim of being greedy when others are fearful applies the best today. There is merit in being contrarian in these markets and good non-intuitive bets should pay off well in the long term. For example, gold remains a great pick as equity, FX, and inflation hedge. 

Plenty of good government bond opportunities are going to show up over the next quarter. The US government just released savings bonds at 9.62%! The most gold-plated credit rating available with 9.62% gives you an idea of what you could potentially find in debt in India sovereign as well. Within equity, we are picking pharma, IT, BFSI, and auto going into the next quarter.

2. Why should investors invest in muhurat trading?

There is no rational reason to invest in muhurat trading. It is entirely psychological. The tradition of muhurat trading is innately Indian. In the markets, you live and die by facts and numbers but once a year you pray to the gods for the zero-sum game of the stock market to break in your favour!

We trade during muhurat for this same reason – to collectively participate in hope for the next year. Other than that, you should buy more of the stocks you believe in to hold for the long term during muhurat trading.

3. What should be the stock-picking strategy during muhurat trading?

Within equity, we are picking pharma, IT, BFSI, and auto going into the next quarter. We are not playing consumption or commodity themes. Generally, anything we are buying is with a long-term view so the fundamentals of businesses we are investing in remain solid.

4. Factors to keep in mind when considering muhurat trading

From a number’s perspective, 11 of the last 15 muhurat sessions have closed in the green so muhurat can be a good day for traders. Perhaps there is a case for “hope arbitrage” where you can go long early in the session and close out positions at the end of the trade.

But a green muhurat day does not imply a good year. Therefore, lessons of sensible investing continue to apply. Don’t leverage, buy fundamentally good companies, and invest for the long term.

Stock market strategy by Neeraj Chadawar, Head – Quantitative Equity Research, Axis Securities for Diwali Muhurat Trading 2022

1. 5 investment themes for Muhurat Trading

Factoring in all economic and market developments, we present the following themes for SAMVAT 2079:

• Housing and Banking will be major themes to watch out for in 2023, on account of their improved economic outlook and the pick-up in credit growth. Moreover, affordable housing may even get a further push in the upcoming budget.

• Consumer space is witnessing a strong revival, and many categories are normalizing to pre-Covid levels with a structural uptick in multiple sub-segments. QSR space is well-placed to deliver superior returns.

• Demand momentum in the CV segment is likely to sustain and we expect the CV cycle to maintain its momentum, driven by the pick-up in economic activities and the government’s focus on infrastructure

• With a pick-up in the real estate and housing demand, the home improvement theme has bolstered and continues to be robust in 2023.

• Travel & Tourism stands to be a more promising theme, which has further gained momentum post a pick-up in the vaccination drive.

2. Why should investors invest in muhurat trading and what should be their strategy?

Muhurat trading is a special trading window open during the auspicious day of Diwali reflecting the shades of Indian culture. It’s a very old tradition practiced by investors with a lot of enthusiasm and faith. Further, the investors believe, this will bring prosperity and would enlighten the wealth and financial well-being. Investors should use this opportunity to invest in long-term Diwali muhurat picks ideas.

3. Best long-term investment options for muhurat trading

Based on the above themes, our Fundamental Diwali picks for the long term are: ITC, Ashok Leyland, Polycab, Sundaram Finance, Indian Hotels, IDFC First bank, Westlife development, NOCIL, and Aptus Value Housing.

4. Considering the current market scenario which sectors would be the best to pick for muhurat trading

The investors (domestic + foreign) have proactively shown faith in India’s long-term growth story. Moreover, this belief has only strengthened further in the last 3-4 months, which is manifested in the market structure shifting to domestic-oriented themes that are well-supported by the country’s strength as a domestic consumption economy. We have also seen profitability slowly shifting to commodity consumers from commodity producers in the last quarter. As a result, domestic-oriented themes such as Banks, Domestic Industrials, FMCG, Auto, Hospitals, and Discretionary consumption have outperformed the cyclical + export-oriented themes since June’s bottom. We believe this trend is likely to continue in the upcoming quarters.

5. Top stocks to buy

Based on the above themes, our Fundamental Diwali picks for the long term are : ITC, Ashok Leyland, Polycab, Sundaram Finance, Indian Hotels, IDFC First bank, Westlife development, NOCIL, and Aptus Value Housing.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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