Making Money While You Sleep: Fund Manager's Unusual Insight Draws Surprise, Skepticism

In a surprising twist to conventional trading wisdom, a long-term analysis of the Nifty 50 has revealed that the bulk of market returns over the past 25 years have come not during trading hours, but overnight.

Data compiled by Capitalmind Mutual Fund shows that investors who bought the Nifty at the close of each trading day and sold at the next morning's open would have multiplied their wealth by nearly 100 times. In stark contrast, those who bought at the open and sold at the close each day would have lost 84% of their capital.

From January 2000 to July 2023, the Nifty surged from 1,592 to 25,057 points, delivering a net gain of 23,465 points. However, a deeper breakdown paints a strikingly different picture:

• Overnight gains (close-to-open) accounted for the gain of 39,084 points

• Intraday moves (open-to-close) contributed to the loss of 15,620 points

Capitalmind's research indicates that the benchmark index's long-term growth came outside of regular market hours, as opposed to movement in the regular trading sessions.

A closer look at the return components shows:

• Overnight returns delivered a 5.7% median annual return

• Intraday activity led to a 2.4% annual return

• Dividends added 1.4% annually, providing minor but positive support

"This isn't statistical noise," said Anoop Vijaykumar, Head of Equity at Capitalmind. "It's a persistent phenomenon that has survived multiple market cycles, regulatory changes, and the evolution of India's capital markets."

This pattern has held steady through multiple market cycles and global events including the dot-com crash, 2008 financial crisis, GST implementation, demonetisation, and the Covid-19 pandemic, the report pointed.

Notably, even after the National Stock Exchange introduced a pre-market auction window from 9:00 a.m. to 9:15 a.m. in 2010, the trend has remained consistent.