The Santa Claus Rally in NIFTY – Unwrapping the End-of-Year Market Momentum
Can we find the same Santa Claus Rally in NIFTY as we do in the US?
We are approaching perhaps the strongest two/three weeks of the year: the Santa Claus Rally or the end of the year effect. We have previously covered this holiday effect in a separate article about the US Santa Claus Rally. Today we backtest to see if we can find a Santa Claus Rally in NIFTY.
We backtest the Santa Claus Rally in NIFTY
We did the following:
We downloaded the daily bars of the NIFTY 50 benchmark from Yahoo!finance. The index represents the weighted average of the 50 largest Indian companies. The index has, of course, derivatives contracts – both options and futures. The futures contract is one of the world’s most liquid.
The backtest was done like this:
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If we invested 100 000 the first year and compounded by reinvesting 100% of the equity the following years, we get this equity curve:

The backtest period is from 2008 until today. We backtested the NIFTY cash index, and this one is not a tradable index and should only be looked upon as a proxy.
The average gain per trade is 1.2%, the win ratio is 71%, the profit factor is 6, and the max drawdown is 7%.
It seems like the Santa Claus Rally in NIFTY is no myth.
FAQ:
How was the Santa Claus Rally in NIFTY backtested?
The backtest involved downloading daily bars of the NIFTY 50 benchmark from Yahoo! Finance. The strategy included going long at the close of the second Friday in December and exiting at the close of the first trading day of the new year.
What does the NIFTY 50 benchmark represent?
The NIFTY 50 benchmark represents the weighted average of the 50 largest Indian companies. It includes derivatives contracts, such as options and futures, with the futures contract being one of the world’s most liquid.
When does the Santa Claus Rally in NIFTY typically occur?
The strategy involves going long at the close of the second Friday in December and exiting at the close of the first trading day of the new year, capturing the last two or three weeks of the year.