F&O Expiry vs. First-Day SIPs: A 22-Year Analysis of Timing Advantages in India’s Nifty 50

ArXiv ID: 2507.04859 “View on arXiv”

Authors: Siddharth Gavhale

Abstract

Systematic Investment Plans (SIPs) are a primary vehicle for retail equity participation in India, yet the impact of their intra-month timing remains underexplored. This study offers a 22-year (2003–2024) comparative analysis of SIP performance in the Nifty 50 index, contrasting the conventional first-trading-day (FTD-SIP) strategy with an alternative aligned to monthly Futures and Options expiry days (EXP-SIP). Using a multi-layered statistical framework – including non-parametric tests, effect size metrics, and stochastic dominance – we uncover two key findings. First, EXP-SIPs outperform FTD-SIPs by 0.5–2.5% annually over short-to-medium-term horizons (1–5 years), with Second-Order Stochastic Dominance (SSD) confirming the EXP-SIP as the preferred choice for all risk-averse investors. Second, we establish boundary conditions for this advantage, showing it decays and becomes economically negligible over longer horizons (10–20 years), where compounding and participation dominate. Additionally, the study challenges the prevalent ``12% return’’ narrative in Indian equity markets, finding that the 20-year pre-tax CAGR for Nifty 50 SIPs is closer to 6.7%. These findings carry significant implications for investor welfare, financial product design, and transparency in return reporting.

Keywords: Systematic Investment Plans (SIPs), Second-Order Stochastic Dominance (SSD), Monthly expiry timing, Long-term investment horizon, Nifty 50 index, Equities

Complexity vs Empirical Score

• Math Complexity: 6.5/10
• Empirical Rigor: 7.5/10
• Quadrant: Holy Grail
• Why: The paper employs advanced statistical methods like non-parametric tests and Second-Order Stochastic Dominance (SSD), but its core application is straightforward; empirical rigor is high due to a 22-year dataset and clear backtesting of SIP strategies.

  flowchart TD
    Start(["Research Goal:<br/>Analyze SIP Timing (EXP vs. FTD) in Nifty 50"]) --> Method["Methodology:<br/>22-Year Analysis (2003-2024)<br/>Non-parametric Tests & SSD"]
    Start --> Data["Data Inputs:<br/>Nifty 50 Daily Data<br/>SIP Execution Dates (FTD & Monthly Expiry)"]
    Method --> Proc["Computational Process:<br/>Calculate Returns & CAGR<br/>Assess Risk via Stochastic Dominance"]
    Data --> Proc
    Proc --> Find1["Key Finding 1:<br/>EXP-SIPs Outperform (0.5-2.5% CAGR)<br/>SSD confirms preference for risk-averse"]
    Proc --> Find2["Key Finding 2:<br/>Advantage decays over 10-20 years<br/>Actual CAGR ~6.7% vs. "12%" narrative"]