Every morning on a weekday, the market opens with familiar drama. Investors watch TV anchors speak urgently about global cues. Traders scan charts and brace for the opening minutes that seem to set the day’s direction.
The market’s pulse appears to beat strongest when prices start moving—every second bringing a new headline, every uptick promising opportunity.
Yet when we step back and examine the data, the real story unfolds not during the trading day’s frenzy, but in the quiet hours after it closes.
Over the past 25 years, the Nifty 50 has risen from around 1,600 points to nearly 25,000. But a closer look at the pattern of this gain reveals something few would expect. The gains did not come from the hours between 9:15 am and 3:30 pm when investors are most active. They came from the hours when the market is closed.
If an investor had bought the Nifty 50 at the end of every trading day and sold it at the next day’s opening price, they would have multiplied their wealth nearly a hundred times over. If they had done the reverse, buying at the open and selling at the close, they would have lost nearly 85% of their capital.
The contrast is apparent in the cumulative returns chart. Since 2000, overnight price changes have contributed nearly 39,000 points to the index, while intraday trading has taken away more than 15,000. The trades in the day appear to destroy value that holding overnight quietly restores.
The pattern is striking in its simplicity and persistence, surviving through all the turbulence of the last quarter century—the dot-com bust, the global financial crisis, demonetisation, the implementation of GST, and the Covid-19 shock. NSE’s introduction of a pre-open auction in October 2010 strengthened this overnight effect as markets began to incorporate overnight information more efficiently.
Breaking this down by decade makes the picture even clearer.
In the 2000s, overnight sessions were positive nearly 59% of the time, compared with 54% for intraday trading. In the 2010s, that gap widened to 65% versus 46%. In the current decade, overnight sessions have remained positive two-thirds of the time, while intraday continues to lag at less than half.
Average overnight returns have risen from just under two basis points per day in the early 2000s to almost 12 in the 2020s. Intraday returns have fluctuated around zero or dipped into negative territory, creating a consistent drag on the index’s overall performance.
The distribution of returns shows why this matters. Overnight gains are steady, compact, and less volatile, clustering around a small positive mean. Intraday returns are far more dispersed, with a broader range and a negative skew.
The table that compares cumulative wealth over this period makes the contrast impossible to miss. While this is a theoretical exercise assuming no transaction costs of being invested only overnight or intraday, it serves to highlight the cumulative impact of overnight versus intraday market movements.
To be sure, this is not an Indian anomaly. Researchers studying US and European markets have found similar evidence of what they call the “overnight return premium”.
What drives this persistent pattern?
1. Market makers who hold inventory overnight bear the risk of adverse price movements and expect to be compensated, which leads to higher opening prices.
2. Retail investors tend to trade at the opening bell, reacting to headlines or emotions, while institutional investors transact closer to the close, creating a pattern of reversals across sessions.
3. Another explanation, often referred to as “news window effect”, suggests that markets process information more thoroughly when they are closed. Overnight, investors have time to digest global developments, company announcements, and data releases, allowing prices to reset more calmly by morning.
No single reason explains everything, and that is the point. The markets are complex systems, and patterns like this one reveal more about how risk and information flow through them than about how to exploit them. The persistence of this anomaly across countries and decades suggests that it may be a structural feature of modern markets rather than a statistical curiosity.
This doesn’t mean investors should attempt overnight trading strategies. Transaction costs and taxes would wipe out any advantage. The real insight is that the advantage lies in periods where nothing seems to be happening. The noise of intraday trading feels exciting, but it adds little to long-term wealth creation. The compounding that matters takes place when we stay invested, not when we act.
There’s a psychological dimension too. Investors often confuse movement with progress. The data suggests that patience can be more powerful than action. The discipline to hold through uncertainty, to let time do its quiet work, delivers what constant reaction cannot.
When we review our portfolios each morning, the changes we see reflect a market that never sleeps. The market’s night shift runs unseen and relentless, building value for those patient enough to let it work.
Anoop Vijaykumar is Head of Equity at Capitalmind Mutual Fund.