NRD's

Narrow range days are days when the high low range is very small. This is a kinda vague definition and we first need to be clear on this. Small compared to what? Nifty was around 2000-3000 in the year 2005-2006. A narrow range at that time and now can be very different because the index is now around 5300.

So it is better to express the high low range as a % of the close. For this study, I've taken data from 2010 to date. First take a look at the high low range below. Looking at this plot, now we can define a narrow range day as any day where the high low range is less than 1% of the close.

Basically I was interested to know how many times a narrow range day occurs and what happens on the next day. To start with I selected "high low range less than 0.65%" and then came up with the following data:

The yellow column show the HLR, blue shows the HLR as a  % of the close and the green column shows the next day absolute % change. So here we have 23 instances and the next day average absolute % change is around 1%

Similarly for ' HLR less than 0.75%, we have 44 instances and the next day average return is 0.86%

For HLR less than 1.0%, we have 125 instances and the next day average return is 0.76%

Finally, a narrow range day does not always lead to big moves on the next day but it is always good to be on guard.