Sensex rises over 100 points, but Nifty50 slips near 24,600. What’s driving the divergence?

The Indian stock market opened mixed on Tuesday, with the Sensex rising while the Nifty 50 slipped into the red. The cautious start came after the NSE benchmark saw a sharp late-session surge in the final few minutes of the previous session following the introduction of the new Closing Auction Session (CAS) framework, raising concerns over heightened volatility.

The Sensex rose over 100 points to trade above 78,800, while the Nifty 50 dropped over 150 points, to slip near the 24,600 level. Broader markets also remained mixed, with the Nifty Midcap 100 in the red and the Nifty Smallcap 100 Index in the green.

Asian Paints, Bajaj Finance, Kotak Mahindra Bank, Adani Ports, Bajaj Finserv, Tata Steel, Trent, Axis Bank, Power Grid and Bharti Airtel shares gained around 1% each to lead the gainers on the Sensex, while HUL and Infosys fell around 1% to lead losses.


All sectoral indices on the NSE traded in the red, with Nifty Realty tumbling 1.5% to lead losses. The overall market breadth, however, slightly favoured the bulls, with the NSE seeing 1,389 advances and 1,098 declines, while 121 stocks remained unchanged.

What’s behind the mixed opening for Sensex and Nifty?
While the Sensex's rise remains supported by easing Iran-US uncertainties, positive global cues and other factors, the Nifty's sharp decline comes after the index jumped nearly 200 points in just two minutes on Monday, as traders adjusted to India's new closing auction system for large stocks. At 3.28 pm on Monday, the Nifty was trading at 24,573, before sharply surging to 24,774 to close nearly 1.6% higher at 3.30 pm.

Under the newly launched CAS, continuous trading in eligible stocks ends at 3.15 pm, before the market shifts into a 20-minute auction that sets the official closing level. On its first day of launch, the auction drew strong participation, with 515 trading members placing orders for 56,773 unique PANs, surpassing the long-established pre-open session, the NSE said. BSE meanwhile said that the exchange saw active participation from over 400 trading members in more than 200 scrips on the launch day.

The new system is likely to amplify late-session swings by making closing prices more sensitive to large institutional flows, aggressive buying, short-covering and repositioning in heavyweight stocks, Reuters quoted Hariselvan Radhakrishnan, founder and chief executive of HST Wealth, as saying.

The sharp spurt in the Nifty yesterday, caused primarily by the new Closing Auction Session (CAS) for determining the closing prices of stocks in the F&O segment, is expected to normalise today, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments. He explained that the sharp spike in the Nifty vis-à-vis the Sensex was an aberration caused by the new CAS, and therefore, investors need not attach much importance to this one-day aberration.

What NSE and BSE said on CAS launch

The NSE said in a press release that the index graph during the CAS session needs to be properly interpreted, as there is no sudden change in the index at 3.30 pm, but the order collection, cancellation and matching follows a structured process. As there is no continuous order matching between 3.15 pm and 3.30 pm, the index value remains constant as it is based on executed trade values.

However, indicative values are displayed just beside the "Get Quote" facility on the exchange website, based on the indicative values derived from the equilibrium prices calculated continuously between 3.15 pm and 3.30 pm, it added.

The stock exchange further clarified that the NSE and BSE have separate order books for the CAS session, similar to the continuous trading session, and hence, the prices of individual stocks are also different. As the index is calculated based on the prices determined for individual stocks, the index values across both exchanges can also differ.

"The successful implementation of the Closing Auction Session marks an important milestone in strengthening the market closing processes. The Exchange expects enhanced participation in the Closing Auction Session in the coming days as market participants continue to gain conversance with the newly introduced market functionality," the BSE said.

What lies ahead for Dalal Street?
From the investor’s perspective, the significant trend is the positive development emerging in the economy and markets, according to Vijayakumar. "Growth momentum in the economy is strong as evidenced by the impressive credit growth, sustained growth in auto numbers and improved GST collections. From the market perspective, the significant positive is the return of FIIs to the Indian market," he said.

FIIs have been buyers in the cash segment during the last five days and consequently this has triggered sharp short-covering, according to the analyst, who added that in the near-term, the market is likely to rally further led by the large-caps.

Tech view on Nifty
With the Nifty having come close to the upside objective of 24,800, Anand James, Chief Market Strategist at Geojit Investments, had expected a consolidation today. According to him, dips to 24,500 may find buying interest, but he did not have an upside objective for the day.

Downsides will have to break 24,300 to be dominant again, the analyst cautioned.

(With inputs from agencies)

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