The Nifty index experienced an unusually calm August, with no daily moves of plus or minus 1% or more, a rare occurrence that has historically preceded increased market volatility. This pattern, identified by Raj Gaikar of SAMCO Securities, suggests that the index may soon experience significant movement.
Raj Gaikar's analysis of 6,630 trading days since January 2000 revealed only eight months where the Nifty remained this stable, making August's behavior an event that occurs roughly once every 40 months. Previous instances of such calm were recorded post-2017, with the latest being August 2026.
The immediate aftermath of these calm periods has not always been dramatic, with the Nifty's average one-month forward return at 1.22%. However, the three-month performance has shown more volatility, with returns ranging from a decline of 29.34% to a gain of 12.06%.
“Such periods of extreme calm have not necessarily indicated whether the next major move would be upward or downward, but they have often preceded a meaningful increase in market movement.”
Raj Gaikar, Equity Research Analyst at SAMCO Securities
Axis Securities has adjusted its investment strategy, focusing on earnings-led stock selection over index-level positioning. The brokerage raised its December 2026 Nifty target to 27,360, citing improved earnings estimates for FY27 and FY28.
Foreign portfolio investors have returned as buyers, with net purchases of ₹20,200 crore in July and ₹29,631 crore in August, potentially supporting large-cap stocks, particularly private banks.
“We expect returns to become increasingly earnings-led and stock-specific rather than driven by broad-based multiple expansion.”
Anand Shah, CIO – PMS & AIF, ICICI Prudential Alternate Investments
Background
The Nifty's unusual calm in August 2026 is part of a historical pattern where such periods have often led to increased market volatility. This trend has been observed in the past eight instances since 2017, indicating a potential shift in market dynamics.
As the Nifty enters a phase of potential volatility, investors should watch for geopolitical tensions, crude oil volatility, and currency movements, which could influence market dynamics in the coming months.
