The Sensex witnessed sharp volatility during the Closing Auction Session (CAS) on August 27, as the monthly expiry of futures and options (F&O) contracts coincided with the new closing price mechanism introduced by the Bombay Stock Exchange (BSE). The Sensex fell more than 2,200 points within a five-minute period during the CAS before recovering nearly 2,000 points over the following seven minutes. The index eventually closed at 76,934, down 539 points from the previous session. The sharp movement also affected several major Sensex constituents, raising concerns among market participants about volatility during the closing period.<\/p>\n\n\n\n
The Securities and Exchange Board of India (Sebi) introduced the Closing Auction Session on August 3 as a new method for determining the closing prices of stocks. The mechanism is applicable to around 200 stocks on which equity derivatives contracts are traded. Other non-derivatives stocks continue to use the volume-weighted average price (VWAP) system. The CAS is designed to improve the price discovery process and reduce the scope for manipulation around market closing.<\/p>\n\n\n\n
However, since its introduction, the Sensex and Nifty have experienced significant price movements between 3:15 pm, before the auction begins, and 3:30 pm, when the session ends.<\/p>\n\n\n\n
The volatility was also visible in some of the largest Sensex constituents.<\/p>\n\n\n\n
Reliance Industries, which has the highest weight in the Sensex, fell from around Rs 1,289 to Rs 1,250 during the closing period, representing a decline of about 3% within seven minutes. The stock subsequently recovered to close at around Rs 1,286.<\/p>\n\n\n\n
Similar sharp movements were observed in other major stocks, including HDFC Bank, ITC and Bharti Airtel. Such price movements during the final minutes of trading can have a significant impact on derivatives positions, particularly on expiry days when traders are adjusting or closing contracts.<\/p>\n\n\n\n
The National Stock Exchange (NSE) saw comparatively lower volatility during the same period. The Nifty fell by more than 100 points between 3:18 pm and 3:22 pm before recovering around 60 points by the end of the session. The index closed at 24,091, down 117 points from the previous session. The difference in volatility between the two exchanges has drawn attention to the impact of the new closing mechanism and its interaction with derivatives trading.<\/p>\n\n\n\n
The sharp movements come amid increased regulatory attention towards potential manipulation in index and stock prices during the closing period.<\/p>\n\n\n\n
Earlier in August, Sebi took action against Copthall Mauritius, a JP Morgan entity, over alleged manipulation involving the Sensex and its constituent stocks. The regulator also alleged that Mansi Stock & Share Broking had used a similar strategy in proprietary trades.<\/p>\n\n\n\n
Sebi subsequently barred the entities involved from the market and ordered the disgorgement of nearly Rs 3.8 crore in alleged illegal gains.<\/p>\n\n\n\n
The introduction of CAS was intended, among other objectives, to strengthen the closing price discovery process and reduce the possibility of manipulation.<\/p>\n\n\n\n
The sharp intraday movements highlight the risks associated with trading derivatives close to the market close, particularly on expiry days.<\/p>\n\n\n\n
Large changes in index levels within a few minutes can significantly affect the value of futures and options contracts. While such movements may create opportunities for traders, they can also result in substantial losses when positions move against them.<\/p>\n\n\n\n
The recent volatility is likely to keep market participants focused on how the Closing Auction Session performs as it becomes more established and whether the new mechanism results in more stable and reliable closing prices over time.<\/p>\n\n\n\n
Source: Times Of India<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" The Sensex witnessed sharp volatility during the Closing Auction Session (CAS) on August 27, as the monthly expiry of futures and options (F&O) contracts coincided with the new closing price mechanism introduced by the Bombay Stock Exchange (BSE). The Sensex fell more than 2,200 points within a five-minute period during the CAS before recovering nearly […]<\/p>\n","protected":false},"author":6,"featured_media":425,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-424","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/thesimplehaishow.com\/thesimplehaishow\/wp-json\/wp\/v2\/posts\/424","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thesimplehaishow.com\/thesimplehaishow\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thesimplehaishow.com\/thesimplehaishow\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thesimplehaishow.com\/thesimplehaishow\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/thesimplehaishow.com\/thesimplehaishow\/wp-json\/wp\/v2\/comments?post=424"}],"version-history":[{"count":1,"href":"https:\/\/thesimplehaishow.com\/thesimplehaishow\/wp-json\/wp\/v2\/posts\/424\/revisions"}],"predecessor-version":[{"id":426,"href":"https:\/\/thesimplehaishow.com\/thesimplehaishow\/wp-json\/wp\/v2\/posts\/424\/revisions\/426"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/thesimplehaishow.com\/thesimplehaishow\/wp-json\/wp\/v2\/media\/425"}],"wp:attachment":[{"href":"https:\/\/thesimplehaishow.com\/thesimplehaishow\/wp-json\/wp\/v2\/media?parent=424"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thesimplehaishow.com\/thesimplehaishow\/wp-json\/wp\/v2\/categories?post=424"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thesimplehaishow.com\/thesimplehaishow\/wp-json\/wp\/v2\/tags?post=424"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}