Muhurat Trading Boosts Investor Sentiment in Indian Markets

The Indian stock market has recently shown signs of a positive shift, particularly during the festive season, which is often a time of increased trading activity. This phenomenon, known as 'Muhurat Trading,' typically occurs on the evening of Diwali and is considered an auspicious time for investors to buy stocks. The initial signs of recovery in the benchmark indices this week have been attributed to strong inflows from domestic institutions and a drop in oil prices, which generally helps boost market sentiment.

However, this upward trend was not sustained for long. Concerns over sluggish corporate commentary and the possibility of earnings cuts have led to a prevailing bearish sentiment among investors. Despite these challenges, the optimism displayed during the Muhurat Trading session on Friday indicates that many investors remain hopeful about the market's future. Vikas Gupta, a market expert, suggests that the current market correction may begin to stabilize in the coming weeks, potentially between November 15 and January 15. He believes that a positive trend is likely to emerge during this period.

As of the market close on Friday, the Sensex had risen by 335 points, or 0.42 percent, reaching 79,724, while the Nifty increased by 99 points, or 0.41 percent, to settle at 24,304. Despite these gains, the overall performance of global markets, including India, has been negative throughout October, primarily due to uncertainties surrounding the upcoming US elections. This uncertainty is a significant factor affecting investor confidence.

Gupta also pointed out that two other factors could influence market performance in the near future. The first is the Foreign Institutional Investors (FII) tax-loss trading that typically occurs in December, where investors look to book losses for the year. The second is the 'January effect,' which refers to the tendency of markets to rebound positively in January following the loss-selling in December.

When it comes to sectors that may offer long-term value, experts highlight the banking sector, particularly Public Sector Undertakings (PSUs). Private banks are also seen as attractive, as they are currently trading at significant discounts to their intrinsic values. Additionally, the power sector, especially select PSUs, and the IT sector are viewed as promising for long-term investments.

For any significant reversal in the stance of FIIs, experts believe that there must be an improvement in domestic corporate earnings and a move towards fair valuations. As emerging markets continue to consolidate ahead of the US presidential election and the upcoming Federal Open Market Committee (FOMC) interest rate decision, investors are advised to remain cautious yet optimistic.

While the Indian markets face challenges, the positive sentiment during Muhurat Trading reflects a glimmer of hope for investors. As the festive season unfolds, it is essential for investors to stay informed and consider the long-term potential of their investments. With the right strategies and a keen eye on market trends, there may be opportunities for growth in the coming months.