Diwali and Stock Market: How Did the Markets Perform?

The market sentiment and investor outlook are positive during the festive season, especially Diwali. Many investors consider Diwali an auspicious time to make new investments in the stock market, hoping for positive returns in the upcoming months and years. 

Let’s closely examine the market’s performance during Diwali over the last five years. 

How did the Market Perform in Diwali?

For the entire market, the long-term trend has always been favorable. This article analyzed the Nifty 50’s performance over the last five years, 30 days before and after the muhurat day trading. 

Last Five Years Performance of the Nifty 50 Index During Diwali 

Nifty 50 as of 31st October 2023

19079.60

Return From Last Diwali

▲7.6%

In the table above, we can see the performance of the market in the next 30 days from the date of Diwali. It has been largely positive over the last five years, except in 2021, when the market dropped by 4%.

In terms of annual returns, the Nifty 50 has comfortably outperformed fixed deposit returns every year, except for 2022. Furthermore, the period between November 14, 2020, and November 4, 2021, proved to be the best year for investors in the last five years, with the Nifty 50 rising by more than 40%.

And the 5 years CAGR return of the Nifty 50 index from 27th October 2019 to 31st October 2023 is 10.41%

Let’s look at the annual performance of other well-known Nifty indexes from Diwali to Diwali over the previous five years. 

	Nifty 50	Nifty Next 50	Nifty Mid-cap	Nifty Small Cap
7th Nov 2018- 27th Oct 2019	9.7%	3.2%	-6.5%	–
27th Oct 2019- 14th Nov 2020	9.9%	4.7%	14.8%	10.9%
14th Nov 2020- 4th Nov 2021	40.2%	46.4%	71.5%	79.0%
4th Nov 2021- 24th Oct 2022	-1%	-2.8%	-3.3%	-18.7%
24th Oct 2022- 31st Oct 2023	7.6%	5.0%	30.3%	33.1%

The table above shows that investors who have invested in midcap stocks have generated the most wealth compared to other stock categories over the last five years. Historically, it is evident that investments around Diwali have given positive and good returns to investors in the short and long term.

Diwali is also considered positive for the Auto, FMCG, FMCD, and Jewellery sectors, as people prefer to shop for high-value items during this time. Let’s check out how the Auto and FMCG sectors performed during Diwali.

Nifty Auto Index

Nifty FMCG Index

When we look at the top two sectors believed to benefit the most during Diwali, the returns have been mixed with no clear trend compared to the Nifty 50 index. So, what should be your investment strategy during Diwali?

Investment Strategy During Diwali

Investing is a game of patience and discipline because it’s difficult to predict the next market move, and even experts fail to do so. It is said that the entire year’s return is made in 10 to 15 days on average out of 250 odd trading days for any given year. Predicting the 10 to 15 days when the market moves higher is next to impossible.

• Analyzing the Market Trend Before Investing: Domestic factors no longer dictate India’s momentum. Geopolitical dynamics, interest rates, inflation, exchange rates, global events, and FIIs collectively shape the market sentiment. It’s essential to assess sectoral trends through sectoral chart analysis and other indicators and invest in solid companies to make informed investment decisions.
• Setting Long-Term Perspective: Diwali is a great time to start investing or make a new investment in the market. But, instead of trying to time the market or taking advantage of a possible positive momentum during the Diwali month, adopt a long-term view. Invest systematically through the market’s ups and downs. It will help you compound your wealth faster over time.
• Review and Rebalance: Making a fresh investment every Diwali isn’t necessary. Reviewing your current investments and rebalancing your portfolio to align with the market conditions is equally important. If you are unsure about the process, consulting a financial advisor who can suggest changes per your specific needs and risk profile is wise.

Conclusion

Diwali celebrates the triumphant return of Lord Rama to Ayodha after 14 years of exile. In these 14 years, he went through various trials and challenges, yet he displayed unwavering courage, discipline, patience, and decision-making ability to win over forces of evil. Similarly, the successful investing journey mirrors Rama’s path; it’s a long-term commitment.

Just like Lord Rama systematically constructed the Ramsetu by placing one stone after another, your investment portfolio should be built systematically over time to yield a meaningful return. Also, when Hanuman faced difficulty identifying the life-restoring Sanjeevni hidden within the Himalayan mountain, he brought the entire mountain when in doubt. In the same way, if you are doubtful about which Diwali stocks or Dhanteras stocks to pick for your investments, consider index funds comprising a diverse range of fundamentally strong companies.

So, as we celebrate Diwali, let us embrace the teachings from Ramayan and apply them in our investing journey to help us build stronger finances.