Monday’s trading session took an unusual turn in the Indian stock market, as the Nifty 50 and the Sensex ended with a sharp divergence, leaving many participants on Dalal Street puzzled.
Both benchmark indices had largely moved in tandem throughout the session, but in the final two minutes of trade, the Nifty 50 surged nearly 201 points to settle at 24,773, up 1.60% from Friday’s close.
The Sensex, meanwhile, ended with a comparatively modest gain of 0.70% at 78,639. The unusual divergence was triggered by the implementation of the Closing Auction Session (CAS) in the equity cash segment, which became operational on Monday.
The new auction-based mechanism, introduced by the Securities and Exchange Board of India (Sebi), is designed to determine the closing prices of eligible stocks, resulting in a sharp adjustment in the Nifty 50’s closing value.
The unusual move was not limited to the Nifty 50. The Bank Nifty also witnessed a sharp surge in the final moments of trade, jumping nearly 500 points to settle 1.7% higher at 58,247.
What is Closing Auction Session?
Introduced by the market regulator, the new framework is aimed at making the price discovery process more transparent and robust and applies only to cash-market stocks with derivative contracts, while the existing volume-weighted average price (VWAP)-based methodology will continue for other stocks.
Prior to this, the closing price of stocks (including stocks in the derivative category) in the equity cash segment of the stock exchanges was determined on the basis of the VWAP of trades executed during the last 30 minutes of the Continuous Trading Session (CTS).
The auction-based mechanism brings India closer to global market practices, where closing prices are discovered through an auction that aggregates buy and sell interest into a single pool of liquidity.
Sebi has said the framework is expected to improve execution efficiency for large orders, support fair settlement of derivatives and indices, and enable passive funds to transact at closing prices with lower tracking error.
Timings of Closing Auction Session
Under the new framework, the Closing Auction Session will be conducted every trading day from 3:15 PM to 3:35 PM, immediately after the regular market closes at 3:15 PM. During this 20-minute window, investors can place market and limit orders to help determine the official closing price of eligible stocks.
The order entry window will close randomly between 3:28 PM and 3:30 PM, with the exact time decided automatically by the exchange’s system. This random closure is aimed at preventing last-minute manipulation of stock prices.
While the cash market’s closing auction will end by 3:35 PM, trading in the equity derivatives segment will continue until 3:40 PM.
After the auction, a post-close session will be held in the cash market from 3:50 PM to 4:00 PM, during which investors can buy or sell shares only at the final closing price discovered through the Closing Auction Session.
The same mechanism will also apply to special trading sessions, such as Muhurat Trading.
On such days, the CAS will continue to last 20 minutes, while the derivatives market will remain open for 10 minutes after the CAS order entry period ends. A 10-minute post-close session in the cash market will begin after the derivatives segment closes.
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
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