Diwali is not just the festival of lights; it also marks a significant period for financial markets. In India, millions of investors consider this time as the beginning of a new financial year and step into the stock market during this period. This tradition is centuries old, where, along with Lakshmi Puja, investing is seen as a symbol of prosperity.
The key question is, why do investors become so eager to invest just before Diwali, and what typically happens afterward? Let’s explore.
Pre-Diwali Market Rally: A Historical Overview
Data from the past ten years (2015–2024) shows that the Nifty 50 delivered positive returns in six out of ten instances during the week leading up to Diwali. The average gain stood at 0.78%, reflecting investors’ optimism during the festive season. The strongest rally was seen in 2020, when the Nifty jumped 4.20% in the pre-Diwali week, followed by a 2.40% rise in 2022. This performance is no coincidence. Several factors converge during Diwali to push the markets upward.
At present, the Indian stock market continues to show strong momentum. The return of foreign investors, an improved corporate earnings outlook, and hopes of a potential India–US trade deal have all boosted market sentiment. The total market capitalisation of BSE-listed companies has crossed Rs 467 lakh crore, just 2.3% below last year’s record level. Since the beginning of October, investors have added nearly Rs 16 lakh crore in new value, bringing fresh optimism to the market.
Muhurat Trading: Tradition and Performance
Muhurat Trading is a historic tradition in the Indian stock market, symbolising an auspicious beginning to the New Year (Vikram Samvat) for investors. In 2025, this special session will be held on October 21, from 1:45 PM to 2:45 PM, marking the start of Vikram Samvat 2082. The tradition began in 1957 on the Bombay Stock Exchange (BSE) and in 1992 on the National Stock Exchange (NSE).
Over the past ten Samvat years, Muhurat Trading sessions have generally shown mild but positive gains on the Nifty and Sensex, with average returns usually below 1%. More than market volatility, these sessions reflect emotional and cultural sentiment among investors. The best performance in recent years was seen in 2022, when the Sensex rose 0.87%, followed by a 0.70% gain in 2018. However, negative returns were also recorded in 2016 and 2017.
Post-Diwali Market Performance: Myth or Reality?
It is often said that the stock market declines after Diwali, but the data tells a different story. According to figures from the past ten years, the Nifty has delivered positive returns in six out of ten instances during the week following Diwali, with an average gain of around 0.40%.
Interestingly, in years like 2020 and 2022, when the market witnessed a strong rally before Diwali, positive returns continued even afterward. This clearly indicates that the belief in a ‘post-Diwali market fall’ is more myth than reality. In truth, it is investor sentiment and economic fundamentals, not just festive timing, that shape market trends.
Why Do Investors Turn Bullish Before Diwali?
History of Positive Trends: Over the past 10 Samvat years, Nifty’s performance has been impressive. During this period, the index delivered double-digit (over 10%) annual returns in 7 out of 10 years, with an average return of around 13%.
Sales Surge: During the festive season in October 2024, India witnessed a 12% growth in retail auto sales, 14% in two-wheeler sales, and 7% in passenger vehicles. During the same period, e-commerce sales rose 23%, crossing $12 billion (Rs 1 trillion), while the FMCG segment grew 8–12%, and essential goods sales in tier-2 cities surged up to 30%. This indicates strong demand during the festive season.
Increase in Spending: In October 2024, credit card spending reached Rs 2.02 trillion, up 14.5% from September and 13% year-on-year. Meanwhile, UPI transactions recorded a monthly record of 16.6 billion transactions, reflecting 37% year-on-year growth.
Start of the Earnings Season: The Q3 (October–December) earnings season begins with companies releasing Q2 results. Management guidance during this period often boosts investor confidence in stocks.
Retail Investor Participation: The ‘auspicious’ sentiment encourages retail investors to make new investments, especially during special Muhurat Trading sessions, further enhancing market sentiment.
What Does This Mean for Investors?
In the near term, the key trigger will be a rise in real demand across various consumer segments during the festive season, driven by GST rate cuts and the potential India–US trade agreement. The Indian market has been in a sideways and consolidation phase over the past 9–12 months, but valuations have become more reasonable with time corrections. The Nifty 50’s forward P/E is now below 21x, indicating a good entry point given the expected growth in FY27.
New investors can begin their investment journey this Samvat. However, investors should always consider multiple factors and carefully research stocks before making their selections.
What Can We Expect from the Market in Samvat 2082?
According to India Today, Choice Broking believes investors should use this period to build their portfolios rather than wait on the sidelines. Gradually increasing holdings for long-term investors can help create a strong base for the next market upswing. Additionally, Nifty’s target has been set at 26,500–28,000 by Diwali 2026.
Investors turning bullish before Diwali is not just a tradition, it’s a data-backed strategy. Figures from the past decade show that the period around Diwali has historically been positive for the market, while the myth of a post-Diwali decline has often been proven wrong. Therefore, Diwali is not just a festival of lights but also an opportunity for wealth creation, with the right strategy.
*The article is for information purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
