Profit-Booking Drags Indices Down in First Red Muhurat Trading Session in 9 Years

Headline indices closed slightly lower during the Diwali Muhurat trading session, driven by a pullback in select banking and financial stocks as traders locked in profits following a sharp recent rally. "This marked the first time in nine years that the benchmark indices finished the special Muhurat trading session in the red."

On Sunday, the Nifty 50 ended at 24986.40 points, down 0.2% from Friday. The BSE Sensex closed 28.62 points lower at 80999.40 points. Shares of Sun Pharmaceutical Industries, Tata Steel, and Oil and Natural Gas Corporation ended 1-3% higher and were among the best performing stocks in the Nifty 50 index.

Meanwhile, shares of SBI Life Insurance Company, InterGlobe Aviation, and Bharti Airtel declined more than 1%. A 0.5% decline in HDFC Bank and a 0.8% fall in shares of Infosys also dragged the 50-stock index lower.

The benchmark indices had started the day higher, supported by broad-based gains, but slipped into the red towards the final minutes of trading. Reflecting this slightly volatile session, the India VIX—Dalal Street’s fear gauge—ended 5.5% higher at 18.43 points. A higher VIX also makes options contracts more expensive due to an increase in implied volatility.

Technical analysts attributed this decline to profit booking, following a more than 10% rise in the 50-stock index in seven sessions until Sunday. A global rotation away from artificial intelligence-linked stocks into Indian equities (which are increasingly seen as a hedge against the crowded AI trade) and a drop in prices of oil futures contracts will likely continue to support the domestic market going forward, analysts said.

“Minor profit-taking was observed during the Muhurat trading session. The daily RSI (relative strength index) indicates overbought conditions, suggesting the possibility of a mild retracement,” said Vatsal Bhuva, technical and derivative research analyst at LKP Securities. He expects the 24300–24500 range to act as support for the Nifty 50, with resistance anticipated around 25500. Bhuva added that large-cap banking stocks like HDFC Bank and ICICI Bank are likely to support any future market rally.

Small-cap indices outperformed their benchmark peers, with the Nifty Smallcap 250 rising 1.2% from Friday. All other broader market indices also ended higher.

Among sectoral gauges, the Nifty Pharma, Nifty Healthcare, and Nifty Media indices gained 1.5–1.7%. Conversely, the Nifty Realty and Nifty Bank indices fell 0.4–0.7%. Zee Entertainment Enterprises led the Nifty Media index, surging nearly 7% after announcing that its board will meet on Thursday to address poor shareholder returns, alongside considering a share buyback and an interim dividend.

Q2 Results Impact

Shares of Divi’s Laboratories ended 7.5% higher after the company’s net profit and top-line growth in the September quarter surged ahead of analysts’ projections. Its management’s bullish outlook for upcoming quarters also drove buying interest. Divi’s Laboratories was the best performing stock in the Nifty 200 index.

Finolex Cables shares skyrocketed nearly 20% following robust September-quarter numbers. Its peer, RR Kabel, advanced over 10%, with both stocks finishing as the best performers in the Nifty 500 index.

On the flip side, shares of HBL Engineering fell 4.5% after its consolidated net profit for the September quarter dropped by roughly 50% year-on-year. Voltas slumped to the bottom of the Nifty 200 pack following a weaker-than-expected bottom-line expansion for the quarter.

Going forward, analysts expect crude oil prices to remain in firm control of investors’ sentiment. Foreign institutional investors, who bought a record INR 137.5 billion worth of Indian equities on Friday amid an unwinding of AI-related positions globally, will also direct where the market is headed next.

Derivatives View

Sellers were active across both sides of the options chain of the Nifty 50. However, buyers concentrated around out-of-the-money call options expiring later than Monday, indicating hopes of further gains in the Nifty 50 in November.

Premiums across deep-out-of-the-money contracts declined sharply, albeit on a lower base and primarily due to high theta decay. Closer-to-the-money call contracts were also sold, with prices across 25000-25500 strike prices declining 20-30%. Open interest at many of these positions rose sharply as sellers focused their bets at these levels.

Some traders also bought deep-out-of-the-money put options expiring later than Monday, primarily as a hedge. Put contracts headed to expire worthless on Monday were sold relentlessly, with premiums across 24500-24800 strike prices tumbling 30-40%.