CAS rewrites closing bell: How capital-market stocks performed in 1 month & what comes next

The introduction of the Closing Auction Session (CAS) has added a new dimension to the final minutes of trading in eligible F&O stocks. Since August 3, continuous trading in these stocks ends at 3:15 p.m., followed by a 20-minute auction in which buy and sell orders are pooled and matched to determine the official closing price. While the closing mechanism has changed, the bigger story for capital-market stocks over the past month is the sharp divergence in their performance.

Capital-market stocks saw a mixed performance over the month, with Motilal Oswal Financial Services and MCX emerging as the biggest gainers, both rising over 21%. On the other hand, Indian Energy Exchange, BSE, HDFC AMC and CAMS declined, with losses ranging from around 6% to 10%.

Motilal Oswal, MCX lead the gains

Motilal Oswal Financial Services was the best performer among the stocks in the table, gaining 21.72% between July 31 and September 4. Its closing price rose from ₹851.95 to ₹1,037.


MCX was close behind, gaining 21.66%. The stock moved from ₹2,692.20 on July 31 to ₹3,275.40 on September 4.

Ravi Singh, chief research officer at Mastertrust, attributed the divergence to differences in business exposure rather than CAS alone.

"The sharp divergence reflects differences in business exposure rather than CAS alone. Motilal Oswal has benefited from strong capital-market activity and expectations that institutional trading volumes could improve as the CAS framework settles. MCX has a separate tailwind from strong bullion and commodity derivatives activity."

Anand Rathi Wealth rose 6.86%, closing at ₹2,215.90 compared with ₹2,073.70 at the end of July. Aditya Birla Sun Life AMC gained 4.99%, moving from ₹1,011.80 to ₹1,062.30.

Central Depository Services (India) was up 4.62%, with its closing price rising from ₹1,333 to ₹1,394.60.

Rahul Sharma, head of research at Equity99, said brokerages and wealth-management firms benefited from increased trading and hedging activity during the auction window.

"With introduction of CAS brokerages and wealth management firm benefited the most from increased trading and hedging against market volatility during auction window period this is the reason for rise in Motilal Fin while commodities exchanges remained largely unaffected by CAS."

A mixed performance across the sector

The performance was far from uniform. Indian Energy Exchange recorded the sharpest decline in the group, falling 10.08% from ₹132.24 to ₹118.91.

HDFC Asset Management Company declined 6.02%, while Computer Age Management Services fell 5.95%. BSE was down 6.48%, with its closing price falling from ₹3,646.20 to ₹3,409.80. ICICI Prudential Asset Management Company declined 4.65%, while UTI Asset Management Company fell 2.50%.

KFin Technologies was down 0.96%, while Nippon Life India Asset Management slipped just 0.13%.

At the other end of the relatively stable names, Nuvama Wealth Management gained 0.65%, Angel One rose 0.62%, and 360 One Wam edged up 0.15%. Billionbrains Garage Ventures was almost unchanged, declining 0.19%.

Singh said the weaker performance across some names was linked to their individual business exposures.

"On the other hand, BSE has been affected by weaker equity-derivatives activity, while HDFC AMC and CAMS are more dependent on mutual-fund flows and asset-market performance. IEX remains largely unrelated to CAS, with its outlook driven by power-market reforms and competition concerns."

Sharma said the decline in BSE was linked to the effect of CAS on exchanges, while the weakness in CAMS and HDFC AMC could not be directly attributed to the new mechanism.

"Exchanges are the most affected as CAS lead to temporary dip in continuous cash-market trading volumes and lower participation in the final minutes of trade. which is the reason for fall in BSE Ltd. While the drop in CAMS and HDFC AMC cannot be directly linked to CAS."

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The performance gap stands out

The most striking feature of the one-month period is the wide gap between the winners and losers. MOFSL and MCX gained more than 21% each, while Indian Energy Exchange fell more than 10%. BSE, HDFC AMC and CAMS also recorded declines of around 6%. That leaves a market-capital-market basket showing very different trajectories over the same period, rather than a broad sector-wide move in one direction.

From a technical perspective, Sharma said MOFSL and MCX have emerged as the clear outperformers.

"MOFSL and MCX have emerged as clear outperformers, gaining over 20% and maintaining strong momentum with sustained buying interest."

He said Motilal Oswal Financial Services took support around its 200-day EMA and bounced back at the start of August, while MCX took support from a rising trendline above its 200-day EMA and bounced back around the first week of August.

"Their ability to sustain above key EMAs along with healthy volumes keeps the technical structure positive."

However, after the sharp upmove, Sharma expects some consolidation or profit booking, while a fresh breakout with volume would confirm further upside.

On the weaker stocks, he said BSE was undergoing a retracement towards its 200-day EMA and had taken support around this key long-term average. IEX, meanwhile, faced rejection from its 200-day EMA resistance at the start of August and subsequently formed a Lower High–Lower Low structure on the daily chart.

"CAMS has remained within a multi-month sideways consolidation range, while RSI also moved sideways below the midpoint during this period, resulting in profit booking."

What comes next?

With CAS now changing the way closing prices are discovered, the coming period will offer a larger body of trading data around the new closing mechanism.

Singh said the leaders can sustain momentum if trading activity and investor participation recover, while the underperformers could see a recovery if market volumes, regulatory clarity and company-specific earnings catalysts improve.

"The leaders can sustain momentum if trading volumes, liquidity and investor participation recover. For the underperformers, stronger market volumes, regulatory clarity and company-specific earnings catalysts could support a recovery. SEBI’s review of derivatives settlement methodology is also a near-term positive for capital-market stocks."

Sharma said liquidity should stabilise as market participants adapt to CAS order entry and the random close mechanism.

"Going further as market participants adapt to CAS order entry and random close mechanism liquidity will stabilize, directly benefiting exchange revenues."

He also said the underperformance could be linked to the cooling down of capital-market stocks after the recent rally and pointed to the upcoming NSE IPO as a potential source of momentum.

"The underperformance can also be linked cooling down in capital market stocks post recent rally. The upcoming NSE IPO will also drive momentum in this space."

From a broader technical perspective, Sharma said the Nifty Capital Market Index, trading around 5,475, has consistently taken support around its 50- and 100-day EMAs after every retracement and is currently trading above all key EMAs.

The index is currently forming a Symmetrical Triangle-like formation, with the price taking support along a rising trendline, while RSI has taken support around the midpoint and bounced back. A decisive breakout from the triangle with volume, Sharma believes, could further strengthen the sectoral trend.

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

Disclosure: This article has been written by Kumar Gaurav, who is not a SEBI-registered Research Analyst or an investment advisor. Gaurav does not hold any financial interest in the company as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of the EconomicTimes Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment.