Sensex edges higher, Nifty slips as markets adjust to new closing auction mechanism

New Delhi: Equity benchmarks Sensex and Nifty traded on a mixed note in early deals on Tuesday as investors assessed the impact of the newly introduced Closing Auction Session (CAS), a mechanism that briefly distorted benchmark movements in the previous session.

The BSE Sensex rose 97 points to 78,736.20 in early trade, while the NSE Nifty fell 173.95 points to 24,600.35, giving up part of Monday's sharp gains.

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The divergence follows the rollout of the Closing Auction Session in the equity cash segment, which became operational on Monday for stocks with futures and options (F&O) contracts. The new mechanism is designed to determine closing prices through an auction process, with the aim of making price discovery more transparent and reducing the scope for price manipulation.

Monday's market close, however, witnessed an unusual divergence between the two benchmark indices. While the Sensex ended 544.39 points, or 0.70 percent, higher at 78,639.03, the Nifty surged 390.70 points, or 1.60 percent, to settle at 24,774.30, largely due to the impact of the new auction methodology on F&O stocks.

"The 390-point spurt in the Nifty yesterday caused primarily by the new Closing Auction Session is expected to normalise today. The sharp spike in the Nifty relative to the Sensex was a one-day aberration resulting from the new mechanism, and investors need not read too much into it," V K Vijayakumar, Chief Investment Strategist at Geojit Investments told PTI.

He added that the broader market narrative remains constructive, supported by improving macroeconomic fundamentals and positive investor sentiment, rather than technical changes in benchmark calculations.

Among Sensex constituents, Asian Paints, Tata Steel, Trent, Bajaj Finance, Bharat Electronics and Kotak Mahindra Bank led the gains, while Infosys, Hindustan Unilever, HDFC Bank and Tata Consultancy Services traded lower.

Global cues remained mixed. Asian markets were largely under pressure, with Japan's Nikkei 225, South Korea's Kospi and Hong Kong's Hang Seng trading in the red, while China's Shanghai Composite posted gains. Wall Street ended sharply higher overnight, offering some support to investor sentiment.

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Meanwhile, Brent crude rose 1.36 percent to USD 84.91 a barrel, while foreign institutional investors (FIIs) remained net buyers, purchasing Indian equities worth Rs 922.26 crore on Monday, according to exchange data.

With the initial impact of the new closing auction mechanism expected to stabilise, market participants are likely to turn their attention back to corporate earnings, global developments and foreign fund flows for directional cues.

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