Overnight vs Intraday Price Movements || A Decadal Study

Why you should buy and hold overnight?

Anand Ganapathy

Jan 7, 2022

ITC’s price 8 years back was ₹218 and today it is again trading around ₹218. No share price gain in the last 8 years.

But, did you know that it has gained +670 points Overnight and lost -670 points Intraday?

Don’t Believe us?!! Have a look at the chart below.

Before we get into the other charts, let us first define Overnight & Intraday Price Movement.

Overnight Movement = Today’s Open Price - Previous Day’s Close Price
Intraday Movement = Today’s Close Price - Today’s Open Price

We calculated the Overnight & Intraday price moves of multiple stocks & indices to see how they contributed to the overall price movement. Here’s the list.

RELIANCE - Steady Growth
ASIAN PAINTS - 10x Growth
DEEPAK NITRITE - 100x Growth
ITC - Sideways Movement
YES BANK - The Great Fall
NIFTY & BANKNIFTY - Indices

Let us start with RELIANCE.

Reliance has gained 4400 points overnight and lost around 2700 points Intraday in the last 11 years.

The same applies to high-growth stocks such as Asian Paints and Deepak Nitrite.

In the case of 100 Baggers such as Deepak Nitrite, a significant portion (>80%) of the price movement has happened overnight. During certain time periods, the intraday moves have also contributed significantly to the up move. But, over the longer timeframe, they are still negative.

Now that we have had a look at stocks that have moved sideways and upwards, let us look at the case of Yes Bank.

Even in the case of Yes Bank, the overnight moves are still positive. If you are looking to buy huge quantities of Yes Bank to make a ₹0.1-₹0.5 profit per share, then the best strategy could be to buy towards the close and sell at the open. However, it is good to stay away from stocks such as Yes Bank.

Finally, we had a look at the Indices as well. Here you go.

This trend has been true across stocks and indices over the last decade. The graphs are testimony to that. However, we need to see if this trend will continue in the coming years.

Key Takeaways

Most Stocks and Indices move up overnight as per the study of price movements over the last 11 years.

For Investors - Overnight moves contribute a significant chunk in the case of multi-baggers. If you miss an overnight move, you could easily miss a year of return. Buying and holding good-quality stocks is the key until your thesis goes wrong. Sorry for stating the obvious.

For Traders - The graphs suggest that if you stay short intraday and go long overnight you could make some money in the long run as long as this trend continues. If you are a systematic options trader, you could look at executing overnight spreads to take advantage of overnight moves keeping the downside risk limited.

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