Published Online:March 2025
Product Name:The IUP Journal of Financial Risk Management
Product Type:Article
Product Code:IJFRM030325
DOI:10.71329/IUPJFRM/2025.22.1.52-65
Author Name:Md Imbeshat Aslam and VDMV Lakshmi
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:52-65
The study investigates whether intraday trading acts as a market killer or a market stimulator, with the main focus on market liquidity and volatility. High-frequency 5-minute interval data of volume and open, high, low and close (OHLC) prices of Nifty 50 index (Nifty) over ten trading days, from April 15, 2025 to April 29, 2025, was used for this study. The study applies regression analysis to assess the impact of liquidity on volatility and vice versa, with and without outliers, to differentiate the market behavior between abnormal and stable periods. The study observes that there is a moderately strong correlation between volume and volatility when including all data points, the outliers. However, upon excluding the outliers, the correlation becomes slightly weaker but still highly significant, suggesting that intraday trading enhances liquidity and also increases volatility and market instability under speculative scenarios. Further, regression results also confirm that a meaningful relationship exists between volume and volatility. The study concludes that intraday trading improves liquidity and price discovery, the essential components of a healthy market, but can also bring with it increased volatility in speculative or sentiment-based conditions. Hence, intraday trading acts as both a market stimulator in some situations and a potential market killer in other cases.
Among the different factors that shape the stock market, intraday trading—the buying and selling of financial securities within the same trading day—has emerged as the most influential one. Intraday trading enhances market liquidity, narrows bid-ask spreads, and fosters price discovery.