CAS Truant Again: NSE Derivatives Contracts Expiring Amid Volatility

After a two-week hiatus, the Closing Auction Session (CAS) failed to materialize during Tuesday's late trading session, as weekly derivatives contracts on the NSE were nearing expiration. Within a span of just 30 seconds, between 15:20:00 and 15:20:30, the Nifty index surged approximately 300 points or 1.5%, before plummeting about 240 points or 1.1% in the subsequent eight minutes.

The Sensex index also experienced a sudden spike, albeit to a lesser extent, during CAS. The index rose about 350 points or 0.5% before falling from its peak.

At the close of Tuesday's trading, the Sensex index closed up 685 points or 1%. Meanwhile, the Nifty index reached 22,776 points, a gain of 220 points or 1%. The indices' uptick marked the second consecutive day of gains.

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Largely driven by falling Brent crude prices that slipped below the psychologically significant $100/barrel level, as well as strong global cues.

According to Vinod Nair, head of research at Geojit Investments, crude oil prices plummeted below the $100-mark following a large G7 stockpile release and alternative supply measures that mitigated disruptions to vessel movements through the Strait of Hormuz.

The combination of falling oil prices and strong Q2 business updates from financials and retail. Along with supportive global cues, improved investors' sentiment and helped a rebound from oversold levels.

Domestically, attention now shifts to the Q2 earnings season, which may offer a silver lining amidst weak sequential expectations due to elevated input costs, Nair noted in a note to investors.

Market players expressed caution ahead of the RBI policy decision on Wednesday. With a focus on the central bank's inflation outlook and guidance on further policy tightening.

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Notably, the day's gains in the two indices came despite foreign funds net selling Rs 2,961 crore worth of stocks, according to BSE data. In contrast, domestic institutions were net buyers at Rs 5,089 crore.

Rs 5,089 crore net buyers by domestic institutions.

Markets regulator Sebi is working on revising some rules for the session to address issues of CAS-related volatility.