The new mechanism, introduced by the Securities and Exchange Board of India, has led to noticeable differences in closing prices between the National Stock Exchange and the Bombay Stock Exchange. The discussion intensified after the first few trading sessions under the revised framework produced sharp divergences in official closing prices, leaving many investors confused.
According to reports, the strongest support for introducing the Closing Auction Session came from global passive investors. Foreign funds sought alignment of India’s market structure with international practices to enable execution at the same prices used for benchmark index calculations and thereby reduce tracking error.
Domestic institutions, brokers, traders and exchanges had expressed reservations during the consultation phase. They argued that Indian markets lacked the institutional depth and two-sided liquidity required for an auction-based closing mechanism to deliver efficient and reliable price discovery.
Under the new framework, divergences in individual stock closing prices have become evident. On Tuesday, Trent closed at Rs 3,070 on the BSE, up 1.15 per cent, while the same stock ended at Rs 3,107.70 on the NSE, a gain of 1.89 per cent. Bharat Electronics Ltd closed 0.94 per cent higher at Rs 392 on the BSE but finished 0.17 per cent lower at Rs 391.50 on the NSE.
Bajaj Finance settled 1.06 per cent higher at Rs 1,153 on the BSE yet finished 0.35 per cent lower at Rs 1,149 on the NSE. Mahindra & Mahindra ended at Rs 3,405 on the BSE (up 0.58 per cent) while closing at Rs 3,433 on the NSE (up 0.13 per cent). Similar discrepancies appeared in several other heavyweight stocks, including Bajaj Finserv, Titan, TCS and UltraTech Cement.
The divergence has also been visible at the index level. In the previous session the Nifty surged roughly 1.6 per cent while the Sensex gained only about 0.7 per cent.
Market experts believe the transition may be causing temporary disruptions. One analyst noted that Tuesday’s weekly derivatives expiry, combined with the new methodology for determining futures and options closing prices, distorted market trends and amplified volatility.
“Tuesday’s weekly expiry, combined with the implementation of the new mechanism for determining F&O closing prices, has led to a distortion in market trends. The significant gap between the 3:30 p.m. and 3:40 p.m. closing prices of Nifty stocks and the index, along with the divergence with Sensex, suggests that the new system is not functioning as intended, resulting in heightened price volatility,” the analyst said. “This has triggered forced square-offs of positions, particularly among retail investors, ahead of the 15 minutes blind derivatives window closing session.”
The early experience with the Closing Auction Session has highlighted the challenges of aligning India’s market microstructure with global practices while maintaining consistent price discovery across the two major exchanges.
