Sensex's wild 2,100-point swing: What happened during CAS?
What's the story
The Bombay Stock Exchange's (BSE) benchmark index, Sensex, witnessed a major fall on September 3. The index closed at 76,152.86, down by 417.49 points or 0.55%. However, during the indicative close period of the post-Closing Auction Session (CAS), it fell as much as 2,100 points. This drastic decline left users mystified about the over 2,000-point fall on Sensex and prompted them to share screenshots on social media platforms like X.
System shift
What is CAS?
The CAS, introduced on August 3, is a short end-of-day auction where buy and sell orders are matched to set a stock's official closing price.
It replaced an older method where closing prices were based on the average price of trades executed during the last 30 minutes of continuous trading.
The change was made to bring Indian markets in line with global practices.
Market effects
Why has CAS caused sharp price movements and divergences?
Since its implementation, the CAS has caused sharp price movements and divergences in benchmark indices.
The liquidity during this roughly 20-minute process has been thin and mostly dominated by institutions.
Exchange data shows that CAS trades account for less than 1% of daily cash-market turnover and less than a third of volumes seen under the previous system.
This lower participation means relatively small buy or sell orders can have an outsized impact on key indices.