What It Means
A gap up or gap down happens when a stock or index opens well above (gap up) or well below (gap down) its previous day's close, leaving a visible "gap" on the chart where no trading occurred at all. It's usually driven by news that broke while the market was shut.
How It Works
Because Indian markets close overnight and over weekends, any major news — an earnings surprise, a global market move, a regulatory announcement — gets priced in all at once at the next open rather than gradually during the session. A gap can be filled (price retraces back into the gap during the day) or it can hold and extend the move further, and traders watch the first 15-30 minutes closely to judge which is more likely on that particular day.
Example
If Tata Motors closes at ₹950 and reports strong quarterly results after market hours, it might open the next session at ₹985 — a ₹35 gap up with no trades having happened in between. A trader who held the stock overnight benefits immediately at open; one who didn't has to decide whether to chase the gap or wait for a possible pullback.