Nifty surges 300 points in closing auction, crosses 23,000 on expiry day
The Nifty index surged more than 300 points in less than a minute during Tuesday's closing auction session, briefly crossing the 23,000 level before paring gains. The benchmark index was trading at around 22,717.70 at 3:19:59 pm before the closing auction session began, then spiked 2% to 23,026 at 3:20:30 pm, eventually closing at 22,776. The Sensex similarly witnessed sharp swings, rising to 73,259 during the closing auction session before closing 125 points higher at 73,068.
The sharp volatility during Tuesday's weekly expiry-day session reflects ongoing concerns about price movements following the introduction of Sebi's new Closing Auction Session (CAS) in August. The CAS mechanism collects and matches buy and sell orders for eligible stocks during a 20-minute auction window at a single equilibrium price, aimed at improving price discovery and reducing the impact of last-minute trades. However, the system has led to massive volatility, particularly on expiry days. Sebi has received 20,000 comments on a consultation paper regarding proposed changes to CAS, market timings, and settlement methodology for derivatives contracts.
Market regulator Sebi may partially reverse some CAS rules, according to reports. The regulator is likely to stop using closing auctions to calculate derivatives settlement prices for at least one year, instead using the volume-weighted average price of the last 30 minutes of trading for derivative pricing. Closing auctions would continue to determine end-of-day prices for underlying stocks in the less liquid cash market. Sebi is expected to announce these changes by month-end. Meanwhile, Jefferies noted early signs of recovery, with options volumes rebounding in September after a sharp drop in August.
