Sensex Swings Wildly on BSE CAS Debut During F&O Expiry

The Sensex endured extreme volatility on Thursday, crashing over 2,200 points before recovering nearly 2,000 points during the first monthly derivatives expiry on BSE’s newly introduced Closing Auction Session (CAS). This sharp movement led to significant public outcry among market participants.

Market Swings During Closing Auction

The Securities and Exchange Board of India (SEBI) implemented CAS on August 3, aiming to discover closing prices for stocks and eliminate price manipulation, a practice standard in several developed markets. This new system applies to approximately 200 stocks with equity derivatives contracts.

Since its launch, both the Nifty and Sensex have exhibited wide price variations and extreme volatility between 3:15 PM and 3:30 PM each trading session. This pattern was acutely visible during Thursday’s expiry.

• Sensex crashed over 2,200 points between 3:18 PM and 3:23 PM.
• It then recovered nearly 2,000 points from 3:23 PM to 3:30 PM.
• The index ultimately closed at 76,934 points, down 539 points from Wednesday’s close.
• The Nifty slid over 100 points between 3:18 PM and 3:22 PM.
• It recovered about 60 points, closing 117 points lower at 24,091 points.

Constituent Stock Volatility

Key Sensex constituent stocks also experienced substantial price swings during the CAS period. Reliance Industries, holding the highest weight in the Sensex, demonstrated significant intra-session movement.

• Reliance Industries dropped 3%, from Rs 1,289 to Rs 1,250, within seven minutes.
• It subsequently recovered sharply to close at Rs 1,286.
• Similar volatility was observed in HDFC Bank, ITC, and Bharti Airtel shares.

A trader highlighted on X that buying Sensex put options worth Rs 1 lakh at 3:15 PM and exiting at 3:20 PM could have yielded a profit of Rs 44 lakh in just five minutes, underscoring the session’s extreme swings.

SEBI’s Manipulation Crackdown

The volatility comes as SEBI recently took action against market manipulation. The regulator caught Copthall Mauritius, an arm of JP Morgan, manipulating the Sensex and its constituent stocks.

• Copthall Mauritius made illegal gains of nearly Rs 3 crore.
• Domestic broker Mansi Stock & Share Broking was also implicated in a similar manipulation strategy.
• SEBI banned both Copthall and Mansi Broking (for proprietary trades only) from the market.
• The regulator ordered them to disgorge illegal gains totaling nearly Rs 3.8 crore.

The extreme price variations during the Closing Auction Session on derivatives expiry day highlight ongoing market adjustments to the new mechanism, even as regulatory actions target manipulation.