This sharp price divergence comes after the Special Closing Auction Session (CAS), which took place for the first time on Monday and led to a sharp spike of 200 points on the Nifty 50 index in just one tick.
That one sharp spike had resulted in the Nifty 50 index jump from levels of 24,574 to 24,774, which turned out to be the official closing price of the index at the close of the Closing Auction Session.
However, the Sensex rates did not change much during the auction session and ended 0.7% higher at the close of the session.
There was also a sharp price divergence between the Nifty spot and the Nifty future rates at the close of the trading session on Monday. While the spike resulted in the Nifty spot closing at 24,774, the Nifty futures closed around levels of 24,660, indicating a gap of over 110 points.
Same is the situation with the Nifty Bank, which had seen a sharp one way move higher in the final minutes of the trading session, which took the index past 58,200 levels on a closing basis, at a time when it was struggling to cross the 57,500 mark for all of last week. The index had ended regular trading before the CAS began around levels of 57,750.
Rajesh Baheti, the Managing Director of Crossseas Capital Services, told CNBC-TV18 in an interaction on Tuesday, that there is a major difference between the US and Indian Systems with regards to the closing auction.
He recommended that the F&O session should expire before the cash closing auction system, adding that the lack of Active Market Makers makes the Indian market more prone to volatility during the Closing Auction Session (CAS).
“Continuing CAS in the way it is designed right now is simply dangerous,” Baheti said.
The Nifty 50 index is still down 180 points, while the Sensex has trimmed its gains down to 100 points. Today is also the weekly expiry of the Nifty 50 contracts.
