Indian equity benchmarks ended in the red on Tuesday, with the divergence between the BSE Sensex and the NSE Nifty extending for a second straight session as the National Stock Exchange's (NSE) newly introduced Closing Auction Session (CAS) continued to impact closing price trends.
The NSE Nifty 50 settled at 24,614.90, down 159.40 points, or 0.64 per cent, while the BSE Sensex closed at 78,428.95, losing 210.08 points, or 0.27 per cent.
Market participants continued to closely monitor the impact of the new closing auction framework introduced by the NSE for futures and options (F&O)-eligible stocks. Under the revised system, closing prices are now determined through a dedicated auction process instead of the earlier Volume-Weighted Average Price (VWAP) mechanism.
Trading activity during the Closing Auction Session remained overwhelmingly concentrated on the NSE. The exchange accounted for Rs 1,542.4 crore, or 99.4 per cent, of the total CAS turnover, while the BSE recorded just Rs 9.4 crore, representing 0.6 per cent of the activity.
Among the most actively traded stocks during the closing auction on the NSE were Infosys, ICICI Bank, Bharti Airtel, Reliance Industries, HDFC Bank, Bajaj Finance, Tata Consultancy Services (TCS), Mahindra & Mahindra, State Bank of India (SBI) and Wipro.
The unusual divergence between the two benchmark indices follows Monday's rollout of the NSE's revised closing auction mechanism. The new system is aimed at improving price discovery for F&O contracts by determining closing prices through an auction rather than relying on the VWAP methodology.
In a statement, the NSE said its website has been updated on a beta basis to display real-time indicative equilibrium prices for index constituents during the Closing Auction Session based on unmatched orders. The exchange added that trading terminals used by members will continue to provide live CAS data as before, while the final equilibrium price will be published after all eligible orders are matched at the end of the auction.
The exchange also indicated that it intends to make the new system a permanent feature after the initial implementation phase. Vinod Nair, Head of Research at Geojit Investments, said the combination of Tuesday's weekly derivatives expiry and the introduction of the revised closing mechanism distorted market behaviour.
"Tuesday's weekly expiry, combined with the implementation of the new mechanism for determining F&O closing prices, has led to a distortion in market trends. The significant gap between the 3:30 p.m. and 3:40 p.m. closing prices of Nifty stocks and the index, along with the divergence with the Sensex, suggests that the new system is not functioning as intended, resulting in heightened price volatility," he said.
According to Nair, the increased volatility triggered forced square-offs of several positions, particularly among retail investors, ahead of the 15-minute blind derivatives closing window. He, however, described the developments as "initial teething issues" and said the exchanges, along with the market regulator, would need to iron out the discrepancies. He emphasised that the impact is currently limited to the F&O segment and benchmark indices and does not indicate any broader structural weakness in the market.
Also read: Net FDI decline linked to repatriation
Nair added that India's overall economic and corporate fundamentals remain robust and expressed confidence that the temporary volatility would ease as market participants adapt to the revised settlement framework.
Among sectoral indices, Nifty Media emerged as the biggest gainer with a rise of 2 per cent, followed by Nifty Metal, which advanced 0.91 per cent. On the losing side, Nifty FMCG fell 0.88 per cent, Nifty Auto declined 0.44 per cent, Nifty Pharma slipped 0.24 per cent, while Nifty PSU Bank edged down 0.08 per cent.
In the commodities market, Brent crude oil prices dropped more than 2 per cent to USD 85.66 per barrel. Asian markets ended on a mixed note. Japan's Nikkei rose 0.35 per cent to close at 63,980, while South Korea's KOSPI gained 1.60 per cent to finish at 6,358. In contrast, Hong Kong's Hang Seng declined 0.60 per cent to 25,854, and Taiwan's Weighted Index slipped 0.06 per cent to close at 43,360.
Follow us
