Nifty Bank jumps over 600 points in last five minutes; CAS in focus

Nifty Bank witnessed a sharp surge in the final five minutes of Monday's trading session, gaining more than 600 points during the closing auction window.

The banking index rose 627.6 points from its 3:25 pm level of around 56,769.75 to close at 58,024.95 at 3:30 pm. On a closing basis, Nifty Bank gained 528.65 points or 0.92 per cent.

Index heavyweights such as State Bank of India (SBI), Axis Bank and ICICI Bank gained 1.19 per cent, 2.77 per cent and 2.19 per cent, respectively. Federal Bank, YES Bank and IDFC First Bank jumped as much as 3.62 per cent.

Nifty Bank outlook

Vatsal Bhuva, Technical Analyst at LKP Securities, said, "Nifty Bank closed with a long bullish candlestick, supported by strong buying during the closing auction session."

Bhuva added, "As the move was largely witnessed during the closing auction session, a follow-up buying session is essential to confirm the sustainability of today’s breakout attempt. Immediate resistance is placed at 58,200, while support is seen at 57,300."

Today's sharp move comes few sessions after the first monthly expiry of derivatives contracts on BSE since the introduction of the Closing Auction Session (CAS), when the Sensex and Bankex also recorded significant swings during the auction window.

The Securities and Exchange Board of India (Sebi) introduced CAS on August 3 as a new mechanism for determining the closing prices of stocks eligible for equity derivatives trading. The mechanism applies to around 200 stocks, while stocks without equity derivatives continue to follow the volume-weighted average price (VWAP)-based closing mechanism.

Under CAS, eligible stocks enter a closing auction after regular trading, during which buy and sell orders are matched to determine the final closing price. Sebi has said the mechanism is aimed at improving price discovery and reducing the impact of last-minute orders on closing prices.

Sharp swings seen last week

The impact of the new mechanism was visible last Thursday, when the Sensex recorded sharp movements after the start of the CAS window.

Between 3:18 pm and 3:23 pm, the Sensex fell more than 2,200 points before recovering nearly 2,000 points between 3:23 pm and 3:30 pm. The index eventually closed at 76,934, down 539 points from the previous session.

The Nifty also saw volatility during the corresponding period, although the swings were less pronounced than those on the BSE benchmark. The index fell more than 100 points between 3:18 pm and 3:22 pm before recovering around 50 points. It ended at 24,091, down 117 points.

Why Sebi introduced CAS

Sebi introduced CAS as part of its changes to the closing-price discovery mechanism for stocks eligible for equity derivatives trading.

Sebi chairperson Tuhin Kanta Pandey has described the move as a major market microstructure reform and noted that similar closing-auction mechanisms are used in several major global markets.

"CAS is a very big microstructure reform, and we have actually lagged behind. Many of our global counterparts have already done this. Japan did it in 2024, Hong Kong has done it, and it is there in the US, Germany, Europe and Australia," Pandey said earlier.

According to Pandey, an accurate and reliable closing price is important for index products, passive investment products and the calculation of mutual fund net asset values (NAVs).

He has also highlighted the role of indicative prices and the random closing time in the auction process. These features, according to the Sebi chief, provide greater visibility into price discovery and limit the scope for last-minute bids to influence the final closing price.

"CAS is a transparent mechanism. Its pricing is always visible, and what is happening inside it is visible," Pandey said.

Sebi monitoring new mechanism

Sebi is monitoring the implementation of CAS and has been engaging with market participants to assess the impact of the new system.

"If there is a need to tweak it and improve it, we will also see that," Pandey said, adding that the regulator needs to remain watchful while ensuring that market participants understand the mechanism.

Pandey has also said that the gap between the Sensex and Nifty levels at the end of regular trading and their final closing values under CAS has moderated from the levels seen in the initial days after the mechanism was introduced.

Meanwhile, benchmark Nifty50 fell 95.25 points or 0.39 per cent to close at 24,080.40 on Monday.