Shares of brokerage firms such as Angel One and Motilal Oswal witnessed declines on August 7 after data from the BSE derivatives segment showed a sharp fall in trading turnover following the implementation of the new Closing Auction Session (CAS).
Angel One shares fell around 2.4% to ₹290.1 per share, while Motilal Oswal Financial Services declined nearly 1% to ₹866.05 during afternoon trading.
The decline in brokerage stocks came after lower participation was observed across foreign institutional investor (FII), proprietary and other trading categories during the Sensex weekly futures and options expiry.
According to BSE derivatives data, FII/FPI turnover dropped from ₹26,27,935 crore on July 30 to ₹19,00,755.72 crore on August 7. Proprietary trading turnover also declined significantly, falling from ₹4,86,27,141.21 crore on July 30 to ₹2,33,49,282.97 crore on August 6.
Market experts attributed the fall in activity partly to the introduction of the new closing price mechanism.
Closing Auction Session Triggers Market Volatility
The Closing Auction Session was introduced on Monday for eligible stocks with derivatives contracts. Under the new system, a separate 20-minute trading window begins at 3:15 pm after normal market hours conclude.
During this period, exchanges collect buy and sell orders to determine the closing price based on the maximum executable volume.
The order submission process ends randomly between 3:28 pm and 3:30 pm, after which trades are matched to arrive at the final closing price.
The new mechanism replaces the earlier method where closing prices were calculated using the average trading price during the final 30 minutes of continuous trading.
However, stocks without futures and options contracts continue to follow the previous closing price calculation system.
The implementation of CAS has resulted in increased volatility in benchmark indices, with the Nifty 50 witnessing sharp movements and showing divergence from the BSE Sensex.
Market Participants Expect Adjustment Period
Market participants expect the initial pricing differences and volatility to reduce as traders and investors become more familiar with the mechanism.
Kotak Mutual Fund, in a note to investors, said temporary valuation fluctuations could occur during the transition period but market behaviour is likely to normalise over time.
The fund house noted that pricing inefficiencies should gradually decline as institutional participants adapt to the revised closing framework.
