Sensex falls 210 points, Nifty closes below 24,650 as market snaps 4-day gaining streak

The Indian stock market ended in the red on Tuesday, with Nifty falling deeper on its expiry day as indices snapped a four-day gaining streak amid volatility surrounding the new closing auction session framework.

Sensex dropped over 210 points to close at 78,429, while Nifty 50 fell 159 points to end the session at 24,615 on Tuesday. Broader markets closed mixed, with Nifty Midcap 100 ending in the red and Nifty Smallcap 100 in the green.

Hindustan Unilever (HUL) and NTPC shares fell around 2% each to lead losses on Sensex, while HDFC Bank, Reliance Industries (RIL) and IndiGo shares dropped over 1% each to follow. Bucking the trend, Trent and Bajaj Finance shares gained more than 1% each to lead gains on the benchmark index.


Sectorally, Nifty Realty index slumped more than 2% to lead losses, while Nifty Oil and Gas fell over 1%. Nifty Metal however rose around 1%. The overall market breadth turned slightly negative, with NSE seeing 1,708 declines against 1,602 advances, while 124 stocks remained unchanged.

CAS-related volatility

Tuesday's weekly expiry, combined with the implementation of the new mechanism for determining F&O closing prices, or the closing auction session (CAS), has led to a distortion in market trends, said Vinod Nair, Head of Research at Geojit Investments. He added that the significant gap between the 3:30 pm and 3:40 pm 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. This has triggered forced square-offs of positions, particularly among retail investors, ahead of the 15-minute blind derivatives window closing session, the analyst further said.

"These appear to be initial teething issues in the new system and the exchanges and market regulator need to address the discrepancies. Currently, the impact is limited to the F&O segment of trading stocks and main indices. Importantly, these are not fundamental structural concerns and are likely to be brought under control. The broader economic and financial outlook remains solid and does not alter the view of long-term investors. The current volatility is expected to reverse as the exchanges return to their normal operating structure," Nair further said.

What lies ahead for Dalal Street?

Fundamentally market participants remain focused on developments surrounding the Strait of Hormuz, as greater clarity and stability in the region could help ease crude oil prices and support a moderation in global bond yields, the analyst said. Meanwhile, he added that the ongoing RBI policy meeting is being closely monitored amid global uncertainties and inflation concerns.

"Investors are looking for policy measures from the RBI to address these challenges, along with liquidity support for the banking system, which could help sustain market confidence in the near term," he said.

(Disclaimer: Recommendations, suggestions, views and opinions expressed by experts are their own and do not represent the views of The Economic Times)