Trading Volume, Subsequent Stock Returns and Calendar Effects: Evidence from NIFTY 50 Companies

Abstract

Many investors believe that heavy trading signals the next price move and that some days or months are better for investing. This paper tests these ideas for large Indian companies. It asks two questions: whether the previous day’s trading volume is related to the next day’s return, and whether returns and trading volume follow day-of-week or month-of-year patterns. The sample covers ten NIFTY 50 companies selected from ten different sectors and the NIFTY 50 index, using 982 trading days from January 2022 to December 2025. Trading volume is measured as abnormal volume relative to the previous twenty trading days. The study uses regression with a lagged-return control, Welch’s t-test, one-way ANOVA and the Kruskal–Wallis test, and checks the volume–return results in two sub-periods. Previous-day volume is significantly related to next-day returns for only two companies in the regression and three in the t-test, explains at most about 1.5 per cent of return variation, and the significant companies change between sub-periods. Returns show a day-of-week effect for only one series and a month-of-year effect for only one series, and the NIFTY 50 shows neither. In contrast, trading volume shows strong calendar patterns: it is usually lowest on Mondays and highest on Thursdays, and it differs significantly across months for all ten companies. The results suggest that calendar regularities in this market lie in trading activity rather than in prices. Investors should not rely on volume spikes or calendar rules to predict returns, but they can use volume patterns to plan the timing of large trades.