MUMBAI: In the first monthly expiry of derivatives contracts on BSE after the introduction of Closing Auction Session, popularly known as CAS, sensex and Bankex, BSE’s banking index, witnessed wild swings, triggering social media outcry. The sharp movement in indices and some of their constituents also gave rise to chances for some smart investors to make a killing.On Aug 3, Sebi introduced CAS, a new process of discovering the closing price of stocks that is used in several developed markets, aimed at eliminating chances of price manipulation. CAS is now valid for all those 200-odd stocks on which equity derivatives contracts are traded. For the rest of the non-derivatives stocks, the old system of volume-weighted average price (VWAP) continues. Since the launch of CAS, however, the two leading indices—Nifty and sensex—have witnessed extreme volatility and wide price variation between 3.15pm, just before CAS starts every session, and 3.30pm, when it ends.
On Thursday, within a five-minute window after the start of CAS on BSE—between 3.18pm and 3.23pm—sensex crashed over 2,200 points.
On Thursday, within a five-minute window after the start of CAS on BSE—between 3.18pm and 3.23pm—sensex crashed over 2,200 points and then within the next seven minutes—between 3.23pm and 3.30pm—it recovered nearly 2,000 points. It finally closed at 76,934 points, down 539 points from its Wednesday close.On NSE, things were relatively quiet. Between 3.18pm and 3.22pm, Nifty slid over 100 points but then recovered about 60 points to close 117 points lower at 24,091 points. On BSE, some of the leading stocks which are also sensex constituents witnessed huge volatility. During CAS, Reliance Industries, which has the highest weight in sensex, slid from Rs 1,289 to Rs 1,250, a drop of 3% within seven minutes, but then recovered equally sharply to close at Rs 1,286. Similar price swings were seen in HDFC Bank, ITC, Bharti Airtel and others.Traders continued to cry foul. On X (formerly Twitter), one trader pointed out that if someone had bought sensex put options of 76,500 worth Rs 1 lakh at 3.15pm and exited at 3.20pm, the trader’s profit in just five minutes would have been Rs 44 lakh.A week ago, Copthall Mauritius, a JP Morgan arm, was caught by Sebi, manipulating sensex and its constituents and for making illegal gains worth nearly Rs 3 crore. Sebi had alleged that domestic broker, Mansi Stock & Share Broking, indulged in a similar manipulation strategy. The regulator has banned Copthall and Mansi Broking (for proprietary trades only) from the market and ordered the two to disgorge illegal gains worth nearly Rs 3.8 crore.
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