New Closing Auction Session sees orderly day 2, improved participation

On the second day of the new Closing Auction Session framework, India's equity markets saw an orderly session, reversing prior moves. A Goldman Sachs report noted improved participation and higher turnover, with Nifty recovering from session lows.

Second Day of New Closing Auction Sees Orderly Trading

India's equity markets witnessed a more orderly closing auction session on the second day (Tuesday) of the new Closing Auction Session (CAS) framework, with benchmark indices reversing much of the previous day's auction-driven moves and participation improving modestly, according to a Goldman Sachs analysis.

The report noted that the Nifty opened lower to correct for the previous session's auction-led gains before once again ending higher during the closing auction. "As expected, Nifty saw a gap down opening today, adjusting itself back to the pre-auction level from yesterday (reversing the 80bps uptick)," the report said.

Participation and Turnover Improve

Closing auction participation improved marginally, with the median auction volume rising to 1.9 per cent of the full day's traded volume from 1.7 per cent on the previous day. Turnover during the closing auction also increased to USD 163 million, compared with USD 135 million a day earlier, reflecting higher market activity.

Volatility Eases, Heavyweights Lead Recovery

Despite the benchmark index declining 1.2 per cent during the trading session, the closing auction lifted the Nifty by around 60 basis points above its pre-auction level. According to the report, heavyweight stocks including Infosys, ICICI Bank, Bharti Airtel, Reliance Industries and HDFC Bank were among the most actively traded counters during the auction and largely ended in positive territory, helping the benchmark recover part of its losses. The report observed that price volatility during the auction moderated compared with the first day of implementation. Median stock price movement in the closing auction eased to 45 basis points from 53 basis points previously, while no stock hit the upper or lower 3 per cent price bands.

Weekly Expiry Amplifies Derivatives Volatility

Thursday also marked the weekly expiry of Nifty derivatives, leading to heightened volatility in zero-days-to-expiry (0 DTE) options during the closing auction window. "Today (Tuesday) was also Nifty's weekly expiry and 0 DTE options saw extreme volatility towards the close," the report said.

It added that the Nifty 24,500 call option expiring on the day surged nearly three-fold, rising from 40 at the start of the closing auction at 3:20 pm to 115 by the 3:30 pm close. Although derivatives trading continued until 3:40 pm, option prices remained largely unchanged after the index closing price was discovered.

NSE Continues to Dominate Auction Volumes

The report further highlighted that the National Stock Exchange continued to dominate activity under the new closing auction mechanism, accounting for over 99 per cent of closing auction volumes, while the BSE contributed just 1 per cent. (ANI)

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