Holiday effect long
The holiday effect is a long-studied calendar idea: markets are said to rise more often around exchange holidays, helped by festive optimism and short covering before a break. This strategy tests it on NIFTY futures. In the default post-holiday mode it buys at the close of the session before each NSE holiday and sells at the close of the first session after it. Alternative modes test the pre-holiday session and the New Year turn.How it trades
Results
PRE-BUILT · DEFAULTSWhere it made and lost money
With 15 trades no condition reaches the eight-trade mark, so the splits only describe this one year. Most holidays produced little: the 10 trades during which NIFTY moved less than 1% netted just ₹39. The result came from a few larger moves across the break. Three holidays followed by a fall of more than 1% lost ₹49,143 together, while two followed by a rise of more than 1% made ₹19,170. Because the position is a full futures lot held over the closure with no stop, whatever news arrives during the holiday is taken in full when trading resumes.
About this strategy
- Find exchange holidays from the trading calendar: a weekday with no session between two trading days. More than two missing weekdays in a row is treated as a data gap.
- At the close of the session just before a holiday, buy one lot of the near-month NIFTY future; on a futures expiry day, buy next month's contract instead.
- Hold through the holiday, with no stop and no target.
- Sell at the close of the first session after the holiday.
- In pre-holiday mode, buy one session earlier and sell at the close before the holiday; in New Year mode, hold from December's last close to January's first.
Why traders use it
Studies in many markets have found unusually good returns around holidays, often explained by mood, short sellers closing positions before a break, and lighter selling. Indian traders often talk of festive optimism around Diwali and other holidays. The rule is simple, needs no indicators and trades only around fifteen times a year, which makes it an easy calendar effect to test and compare with other years.
The year in plain words
On NIFTY from 1 Oct 2025 to 30 Sep 2026 in post-holiday mode, the strategy made 15 trades and won 8, but lost ₹29,934 before costs, a profit factor of 0.74. Average losses (₹16,480) were larger than average wins (₹10,678). The year was dominated by two months: March lost ₹59,995 and April gained ₹66,085. Every trade ended at the planned close after the holiday. After ₹20 per order and bid-ask slippage the loss was ₹34,977. In this test, there was no sign of a reliable holiday lift.
What the settings do
Risks
- A futures lot held over a market closure takes any gap from news during the holiday, with no stop.
- About fifteen trades a year makes the effect very hard to measure reliably.
- Holidays are inferred from gaps in the calendar, so missing data could be mistaken for a holiday.
- Published studies of Indian markets mostly do not find a strong holiday effect, so this works best as a control test.
Who it suits
Readers curious about calendar effects who want to see a holiday rule tested on real NIFTY data, and traders comfortable holding a futures lot over a market closure without a stop.
Questions traders ask
What is the holiday effect in the stock market?
It is the observation, in several markets, that returns around exchange holidays have been better than on ordinary days. Explanations include festive optimism and short sellers closing positions before a break. In Indian studies the evidence is weak, apart from some signs around the New Year.
Is the holiday effect strategy profitable on NIFTY?
Not in this test. Buying NIFTY futures before each holiday and selling after the first session back lost ₹29,934 before costs and ₹34,977 after ₹20 per order and bid-ask slippage (statutory charges not included), from 1 Oct 2025 to 30 Sep 2026. Past results do not guarantee future ones.
Does the market rise before Diwali?
Many traders believe so, but one year of data cannot settle it, and this strategy treats all exchange holidays alike rather than singling out Diwali. Results depend heavily on the news that arrives around each break.
How does the strategy know which days are holidays?
It reads the exchange calendar from the backtest's own trading days: a weekday with no session between two trading days is a holiday. Since the exchange publishes its holiday list in advance, knowing about a holiday ahead of time is not using future information.