Modi candle on SGX Nifty

Our PM Modi announced a stimulus package for Indian economy. As soon as the announcement was made SGX Nifty took off like a rocket. At the time of writing this blog, SGX Nifty had already shot up more than 3% . This indicates that Nifty is highly likely to show a similar gap up on market open tomorrow.

SGC Nifty

I was under the impression that a 3% gap up should not be a very rare incident on Nifty. So I decided to take a quick look at the gap up data since 2008. I was surprised to find that there has been just 4 times in the past 12+ years when Nifty opened a gap up of more than 3% from its previous close. There have been ~3000 trading sessions in the past 12 years. What we will likely see tomorrow has happened only 4 times in 3000 trading sessions of Nifty.

Note: Analysis is done for period from 2008-01-01 till 2020-04-08

Gap up data

I further decided to see how Nifty traded on these days. Below are the charts for the above 4 days.

29 Oct 2008

29 Oct 2008

8 Dec 2008

8 Dec 2008

27 Mar 2020

27 Mar 2020

7 Apr 2020

7 Apr 2020

Conclusion

We have just 4 data points for this market scenario, so it would be unfair to confidently say anything conclusively. It is fascinating to observe such rare events and how they have behaved in the past. Let see what market has in the bag for tomorrow.

See more such analysis on Iron Condor options strategy here

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