Nifty experienced extreme volatility during Tuesday's monthly F&O expiry day, with its indicative price plunging 2% in just 2 seconds during the closing auction session. As reported by The Economic Times, the index crashed from 22,684 to 22,249 at 3:20:01, representing a sharp drop of 435 points in just two seconds. However, the index recovered rapidly and closed above the pre-CAS level at 22,716, demonstrating the extreme price swings that have become characteristic of the Closing Auction Session mechanism. Overall, Nifty lost 64 points or 0.28% on Tuesday, with technical charts remaining weak for the benchmark index.
India's markets regulator has received approximately 3,500 responses to proposed changes in the closing auction session framework, according to The Economic Times. SEBI Chairman Tuhin Kanta Pandey announced this development on Thursday, highlighting the significant public interest in the regulatory review process. The response came after SEBI proposed a comprehensive review of the Closing Auction Session (CAS) framework earlier this month, inviting stakeholder feedback and public comments by October 3.
SEBI is reviewing expiry-day derivatives settlement prices after concerns over the Closing Auction Session (CAS), with two VWAP-based methods under consideration. The first option, called Blended VWAP, would use transactions executed during the final 30 minutes of the Continuous Trading Session (CTS) as well as the 10-minute CAS, with contribution depending on actual traded value without predetermined weights. The second option would temporarily retain the earlier CTS VWAP methodology, using only trades from the final 30 minutes of continuous trading, which SEBI proposes as an interim arrangement for at least one year.
Under the Closing Auction Session framework, which was introduced on August 3 for stocks with active futures and options contracts, a short auction at the end of the trading day helps establish the final closing price of equities. However, the newly implemented mechanism has resulted in significant price swings in derivatives contracts on expiry days, with the Nifty witnessing a strong upswing in the final few minutes of the session, driving it almost 1% up from the day's low and 0.50% up from the previous close on the expiry day of the August F&O series. SEBI has also proposed related changes to the CAS framework, including discontinuing the dissemination of indicative index values and restrictions on order cancellations beyond a 1% band from the reference price.
Technical analysts are closely watching key support and resistance levels as Nifty approaches critical expiry zones. Hitesh Tailor from Choice Broking believes Nifty 22,500 remains the crucial support zone for any short-term recovery attempt, with potential stability or recovery towards 22,800–23,000 if the index sustains above this level. However, a decisive break below 22,500 would weaken the setup further and could drag the index towards 22,182–22,100. Ajit Mishra from Religare Broking expects Tuesday's session to be volatile, with immediate cushion at 22,600 after yesterday's fall, while upside may remain capped to the 23,000 zone. The final 30 minutes and closing levels around these key zones will be important in determining the near-term trend, as the CAS factor can further amplify price movements in the closing minutes.
