SEBI Closing Auction Session Causes Stock Price Divergences

The Securities and Exchange Board of India (SEBI) introduced a new Closing Auction Session (CAS) mechanism designed to align Indian market structures with international standards and minimize tracking errors for global passive investors. The transition has instead resulted in significant price divergences for various stocks and benchmark indices between the National Stock Exchange and the Bombay Stock Exchange.

On Tuesday, these discrepancies became particularly evident in shares of Trent, Bharat Electronics Ltd, Bajaj Finance, and Mahindra & Mahindra. Market analysts link these distortions and the accompanying volatility to a combination of the new methodology for determining closing prices for futures and options and a weekly derivatives expiry.

These price gaps have led to forced square-offs of positions, which have hit retail investors especially hard during the 15-minute blind derivatives window closing session. The volatility and resulting financial discrepancies have sparked widespread debate among investors on social media.