Why Sensex jumped 504-pts, while Nifty plunged 184-pts Tuesday morning?

Ajit Mishra of Religare Broking explains that stock prices were adjusting following a variation in behaviour during Monday's closing auction session on the BSE and NSE.

The BSE Sensex jumped 504 points to an intra-day high of 79,143 in Tuesday's early trade, while the Nifty 50 plunged 184 points to an intra-day low of 24,590. Analysts say the sharp divergence in the Sensex’s and Nifty’s behaviour on Tuesday resulted from what happened in the index constituents during the first-ever closing auction session (CAS) on Monday.  As per the new mechanism, the closing prices of F&O stocks for a particular day, which include the Sensex 30 and Nifty 50 stocks, will be determined as per an equilibrium price reached during the auction session between 3:15 PM and 3:30 PM.  On Monday, the Nifty's closing price saw an uptick of 0.82 percentage points (finally closing 390 points higher) due to sharp swings seen in select index heavyweights such as ICICI Bank, Bharti Airtel, TCS, Hindustan Unilever and Infosys. However, the corresponding values for these stocks did not see significant changes on the BSE.  ALSO READ | New system to determine closing share prices off to a rocky start  The 390-point spurt in the Nifty on Monday, said VK Vijayakumar, Chief Investment Strategist, Geojit Investments, was caused primarily by the new closing auction session (CAS) for determining the closing prices of stocks in the F&O segment, which is expected to normalise on Tuesday.  "The sharp spike in Nifty vis-a-vis Sensex was an aberration caused by the new CAS, and therefore, investors need not attach much importance to this one-day aberration," he added.  Ajit Mishra, SVP Research at Religare Broking highlights that the sharp divergence in the Sensex and Nifty can be attributed to lower investor participation during CAS on the BSE, which saw a turnover of roughly ₹11 crore, as against a turnover of ₹1,276 crore on the NSE.  The analyst says that certain stocks that witnessed sharp gains on the NSE are seeing price adjustments.  "On Monday, during CAS, at one exchange we didn't see anything or any material move, and on Tuesday we are seeing a partial reversal or adjustment of the same. We need to wait a few days to see how things pan out with this new mechanism," said Mishra.  On Tuesday, thus far, select index heavyweights such as Infosys, TCS, Hindustan Unilever and Reliance Industries were down over 1 per cent each on the NSE, while down 0.2-0.7 per cent on the BSE. As of 9:55 AM, the Sensex was up 225 points at 78,865, and the Nifty was down 140 points at 24,635. 

 

  The analyst adds that select Nifty options prices saw a 40-50 per cent spike in Monday's trade. Tuesday's price action during the CAS session will be important due to the weekly Nifty expiry.  Meanwhile from a technical perspective, Rajesh Palviya, Head of Research, Axis Direct feels the market structure continues to remain positive as long as the Nifty holds above the 24,500 support zone. "Immediate resistance is placed near 24,900 levels, and a decisive close above this level could pave the way towards 25,150," he said.  Disclaimer: Views and outlook shared on the stock belong to the respective brokerages and are not endorsed by Business Standard. Readers' discretion is advised.