Article author by: Dr. Girija Shawarikar, | Assistant Professor (Economics), SP Jain School of Global Management (Dubai-Mumbai-Singapore-Sydney)
Deepavali, celebrated globally as the festival of lights, has evolved far beyond its religious roots to become a powerful annual economic catalyst, most notably in India but also across countries with sizeable Indian communities. The festival coincides with the harvest season and creates a cyclical economic stimulus marked by heightened bonuses, increased temporary employment, and a sharp rise in consumer demand. In an economy where the Marginal Propensity to Consume (MPC) is already high, the money spent during Deepavali, also known as Diwali does more than circulate- it multiplies. Each rupee generates additional rounds of expenditure, significantly contributing to the country’s Gross Domestic Product (GDP). This annual surge offers a compelling real-world example of behavioural science at play in financial decision-making.
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The Gold Paradox: Sentiment Over Price
One of the most intriguing aspects of Deepavali is the sustained demand for gold despite rising prices. Traditional economic theory suggests that higher prices suppress demand, but Diwali defies this logic. Behavioural finance explains why.
Gold purchases, especially on Dhanteras are deeply symbolic. Gold is widely associated with prosperity, protection, and divine blessing. During Deepavali, its value becomes psychological rather than purely financial. Cultural beliefs override rational calculations, leading consumers to buy gold even when prices peak. The transaction is less about investment returns and more about fulfilling a cultural and emotional mandate.
From Consumption to Strategic Investment
Rising gold prices have shifted some consumers from traditional ornamental purchases to strategic investment options. The demand for gold remains strong, but its form is evolving.
Modern financial instruments like Sovereign Gold Bonds (SGBs) and Gold Exchange-Traded Funds (ETFs) are gaining traction. These instruments allow consumers to honour the cultural significance of buying gold while also ensuring liquidity, transparency, and elimination of storage costs. This “financialization of festivity” represents a sophisticated adaptation, where cultural practices coexist with modern financial prudence.
Sentiment and the Muhurat Market
The influence of Diwali on financial markets is further evident in Muhurat Trading, a symbolic trading window on Diwali evening. Investors view this period as auspicious, creating a brief but observable optimism in market activity. This phenomenon demonstrates herd behaviour: collective belief fuels collective action, which in turn reinforces market sentiment. In this case, the belief in auspicious timing becomes a self-fulfilling financial event.
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Deepavali Worldwide: Cultural Sentiment Meets Financial Pragmatism
Deepavali’s financial impact extends globally, especially in multicultural hubs like Singapore. Jewellery stores, Indian retail outlets, and online platforms observe increased footfall and engagement during the festive period. The Indian diaspora’s cultural practices create measurable economic activity, illustrating how tradition and sentiment influence markets even outside India. Here too, purchases are driven by a mix of cultural identity, emotional resonance, and increasingly, financial practicality.
A Festival Where Behaviour Meets Financial Decision
Deepavali reveals how markets are shaped not only by rational behaviour but also by emotions, beliefs, and rituals. The willingness to buy gold at premium prices, the budgeting for festive expenses, and the optimism surrounding Muhurat Trading all illustrate the deep interplay between psychology and markets.
Ultimately, Diwali is more than a celebration of lights. From India to Singapore and beyond, the economic footprint of Deepavali underscores how traditions and cultural sentiment shape markets, stimulate consumption, and contribute to economic growth. Ultimately, Deepavali exemplifies the harmonious relationship between cultural celebration and economic activity, reminding us that markets are as much about human emotion as they are about numbers.
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