After the fall of kingdom of Maharaja Ranjit Singh, there were several attempts to raise the old glory of the Khalsa. Several movements to reform the Sikhism were started. First one being Nirankari movement, Which was started by Baba Dyal (1783-1855). He was contemporary of Ranjit Singh. A man of humble origin. He preached against the rites and rituals that were creeping into Sikhism. He saw that Sikhism was being assimiliated into Hindusim in front of his eyes. His main target was the worship of images against which he preached vigorously. He re-emphasized the Sikh belief in Nirankar—the Formless One. From this, the movement originating from his message came to be known as the Nirankari movement.

Situation after the fall of Sarkar Khalsa was were such that to quote Sardar Harbans Singh in Heritage of the Sikhs he says " The Sikhs were deeply galled at the fall of their kingdom, but not unduly dismayed. They attributed the outcome of their contest with the English to the chances of war. They were also aware that, despite the deceitfulness of courtiers such as Lal Singh and Tej Singh, they had fought the ferringhi squarely, and maintained their manly demeanour even in defeat. In this mood, it was easier for them to be reconciled to their lot after normalcy was restored. The peaceful spell which followed, however, produced an attitude of unwariness. Conventional and superstitious ritual which, forbidden by the Gurus, had become acceptable as an adjunct of regal pomp and ceremony during the days of Sikh power gained an increasing hold over the Sikh mind. The true teachings of the Gurus which had supplied Sikhism its potent principle of reform and regeneration were obscured by this rising tide of conservatism. The Sikh religion was losing its characteristic vigour and its votaries were relapsing into beliefs and dogmas from which the Gurus' teaching had extricated them. Absorption into ceremonial Hinduism seemed the course inevitably set for them."

Two factors which separated the Sikhs from other Punjabis were the outward marks of their faith, especially the kesas. Baba Dyal's influence was confined to the north-western districts of the Punjab. In 1851, he founded at Rawalpindi the Nirankari Darbar and gave this body the form of a sect. On his death, four years later, he was succeeded in the leadership of the community by his son, Baba Darbara singh . The latter continued to propagate his father' s teachings, prohibiting idolatrous worship, the use of alcohol and extravagant expenditure on weddings. He introduced in the Rawalpindi area the anand form of marrying rite. Anand, an austerely simple and inexpensive ceremony, became a cardinal point with leaders of subsequent Sikh reformation movements.
Sardar Harbans Singh ji further quote "What an unambiguous, crucial development the Nirankari movement was in Sikh life will be borne out by this excerpt from the annual report of the Ludhiana Christian Mission for 1853:

Sometime in the summer we heard of a movement . . .
which from the representations we received, seemed to indicate
a state of mind favourable to the reception of Truth.
It was deemed expedient to visit them, to ascertain the true
nature of the movement and, if possible, to give it a
proper direction. On investigation, however, it was found that
the whole movement was the result of the efforts of an
individual to establish a new panth (religious sect)
of which he should be the instructor They professedly
reject idolatry, and all reverence and respect for whatever
is held sacred by Sikhs or Hindus, except Nanak and his
Granth They are called Nirankaris, from their belief
in God, as a spirit without bodily form. The next great
fundamental principle of their religion is that salvation
is to be obtained by meditation of God. They regard Nanak as
their saviour, in asmuch as he taught them the way of salvation.
Of their peculiar practices only two things are learned.
First, they assemble every morning for worship, which
consists of bowing the head to the ground before the Granth,
making offerings and in hearing the Granth read by one of
their numbers, and explained also if their leader be present.
Secondly, they do not burn their dead, because that would
make them too much like Christians and Musalmans, but
throw them into the river."

Many people at this time held the view that British was trying to favour Sikhs by making sure that Sikhs were building institutions. The above comment by Ludhiana mission in 1853 discredits any such accusations since at that time British and Sikhs had just fought two lengthy wars. Also Nirankari movement was started four years after Anglo-Sikh war when relations between Sikhs and British were very bad. British only favoured Sikhs in early part of twentieth century when money and land for Khalsa college and other such institutions was granted by British (British also helped create institutions like Aligarh Muslim university and Benaras Hindu university, so Sikhs were not favoured on the expense of others).

This Nirankari movement in late 20th century was hijacked by Arya Samajis and other neo Hindu fanatics who wanted Sikhs to drop all their symbols and assimiliate into their religion. These New Neo Nirankaris who believed in "Living Gurus" confronted Sikhs at Amritsar in 1979 on the Baisakhi day when their living guru "Gurbachan" was trying to create Seven Stars just like Guru had created five beloved one's, obviously to proove to the Sikhs that he is more or less like Guru Gobind Singh (a very serious blasphamy for Sikhs, it is like telling christians or muslims that "I am christ" or "I am mohammad".

Sikhs under Akhand Kirtani Jatha started their march from Akal Takht to stop Gurbachan but were greeted by bullets. This whole incident was solely responsible for the turmoil in Punjab in 1980's. These new nirankaris have been aptly named "Naqli Nirankaris" or the "False Nirankaris".

Article taken from these books.
Encyclopedia of Sikhism edited by Harbans Singh ji.