Sensex dives 2,200 points in 5 mins, recovers 2,000 points in next 7
The BSE Sensex experienced extreme volatility during the newly introduced Closing Auction Session, with the index crashing 2,200 points and recovering 2,000 points within minutes. Traders have expressed concerns over the impact of this new mechanism on market stability and price discovery.
Why it matters
The incident highlights potential flaws in new market regulatory mechanisms intended to prevent manipulation, raising questions about the stability of India's financial infrastructure.
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.
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