The Impact of the US Equity Market Movements on Overnight Returns in the Indian Stock Market: The Moderating Role of Market Volatility.

Advait Rohatgi

The Impact of the US Equity Market Movements on Overnight Returns in the Indian Stock Market: The Moderating Role of Market Volatility.

Author(s)	Advait Rohatgi
Country	India
Abstract	This paper studies the relationship between returns in the US equity market and opening gaps in the subsequent Indian Nifty 50. The relationship is studied while also considering whether the relationship varies during periods of high expected US equity volatility. Daily closing and opening prices for the S&P 500 and Nifty 50 are used in conjunction with closing values for the Cboe Volatility Index (VIX). A sample of 239 eligible days is created from 2025 data. The relationship is then examined using correlation, simple linear regression, directional agreement, and average opening gap. For the overall sample, there is a positive correlation (0.386) and R² of 0.149. This means that the fitted linear relationship explains roughly 14.9% of the variation in the opening gaps for the Indian Nifty 50. For days with high VIX values, there is a higher correlation (0.433) and R² of 0.188 compared to the other days, which have values of 0.288 and 0.083, respectively. The level of directional agreement, however, is similar at 63.9% and 63.5% for the high and the other days, respectively. This analysis suggests a positive relationship between the returns in the US equity market and the subsequent opening gaps in Indian equities. The relationship appears to be stronger during high volatility days. A sensitivity check shows that part of the strength of the fitted relationship comes from one unusually large observation: the Indian trading day of 7 April 2025, matched to the US session of 4 April 2025. However, these results are merely descriptive and do not imply causality, statistical significance, or the ability to forecast out of sample.
Field	Sociology > Banking / Finance
Published In	Volume 8, Issue 6, November-December 2026
Published On	2026-11-07

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The Impact of the US Equity Market Movements on Overnight Returns in the Indian Stock Market: The Moderating Role of Market Volatility.

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