Basic Nifty-50 statistics
Given the recent market gyrations and general lack of direction (trend), I thought it would be worthwhile to remind ourselves of the average one-day moves in the S&P CNX Nifty-50 index. This is important so that on any given day, we do not get carried away if the market moves 1-2% up or down and the financial media starts calling it names like “strong move”, “win for the bulls”, “bear market”, etc. First, the data:
I’ve computed the (average & std-dev of) % change, intraday range, up/down change, etc. for 3 time periods, as seen above. Here are some inferences:
* On any given day, the change in Nifty will range from -1.6% to +1.6%, with a 68% probability. Thus, a 1% move is either direction is random, in the grand scheme of things.
* The average intraday range is ~2% with std-dev of 1.5%; thus, what might seem like a very volatile day may not really be so.
* If we separate UP & DOWN days, we realize that even a 2% move is not beyond normal expectations.
This is not to imply that large moves (of the black swan kind) are very rare. Rather, I’m trying to point out that most of the smaller moves are random and trying to “read” something into them is not worth your time. Of course, a series of significant up/down moves will NOT be considered random, and might have predictive value.
We could compile similar data for the individual stocks in the index, and realize that stocks too move at random most days - even around earnings releases or other supposedly important news announcements.
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