India's Nifty 50 seen opening lower as new closing auction spurs caution
- GIFT Nifty futures were at 24,653.5
India’s Nifty 50 was set to open lower on Tuesday after a sharp late-session rise in the previous session following the launch of a new Closing Auction Session (CAS) framework, leaving traders wary of higher volatility.
GIFT Nifty futures were at 24,653.5 as of 8:13 a.m. IST, indicating the benchmark Nifty 50 could open below Monday’s close of 24,774.3.
The Nifty and the Sensex rose 1.6% and 0.7% on Monday, showing a rare divergence after the launch of the new auction mechanism for stocks with traded futures and options contracts.
“Both the exchanges have separate order books for CAS session similar to the continuous trading session and hence, the prices of individual stocks are also different,” NSE said in a statement late on Monday.
Under the CAS, continuous trading in eligible shares ends at 3:15 p.m. before the market moves into a 20-minute auction that sets the official close.
The auction price is determined within a plus-or-minus 3% band around a volume-weighted average price, or VWAP, reference price, concentrating more end-of-day execution into a compressed window.
On its first day, the auction drew strong participation, with 515 trading members placing orders for 56,773 unique PANs, surpassing the long-established pre-open session, and activity is expected to deepen over time, NSE said.
The new structure could amplify late-session swings by making closing prices more sensitive to large institutional flows, aggressive buying, short-covering and repositioning in heavyweight stocks, said Hariselvan Radhakrishnan, founder and chief executive of HST Wealth.
It could also intensify weekly expiry volatility by concentrating institutional flows, short-covering and position adjustments into a narrow closing-auction window, two analysts said.
Nifty’s weekly options expire on Tuesday.
Elsewhere, Asian shares edged higher after Wall Street closed higher overnight. Brent crude rose 0.8% after tumbling 7% on Monday to a three-week low.
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