From what I can tell, the nudging feature of Nightstand Mode requires that the "Wake Screen on Wrist Raise" mode be enabled.
I think it is unfortunate that these two features appear to be related to each other. I'd rather Nightstand Mode functionality behaved independently of other settings like this. The user interface does not make it clear that changing the "Wake Screen on Wrist Raise" mode will affect Nightstand Mode.
Also, note that enabling Theater Mode will automatically disable "Wake Screen on Wrist Raise." I use Theater Mode as a quick and convenient way to disable "Wake Screen on Wrist Mode" because it is quickly accessible from the Control Center. I like how it makes my watch a little less conspicuous/distracting and how it helps the battery last longer. But, unfortunately, it has this side effect of also affecting Nightstand Mode, even though they don't appear to be related features on the surface.