CAS review: BSE, Groww rally 3% as Sebi panel likely backs VWAP method

Shares of exchanges and stock broking firms surged in trade after reports emerged that a Securities and Exchange Board of India (Sebi) committee has backed the settlement based on the volume-weighted average price (VWAP) method for derivative contracts.

 

The development comes after Sebi received over 20,000 comments on its consultation paper on the closing auction session (CAS), introduced for stocks with derivatives contracts from August 3. READ MORE

 

VWAP is a concept that gives the average price a security has traded at throughout the day based on both volume and price.

 

On the bourses, shares of BSE Ltd, Groww and Angel One gained over 3 per cent each to trade at ₹3,445, ₹200 and ₹315, respectively, around 2:30 PM. Motilal Oswal Financial Services advanced 2.5 per cent to ₹1,065.65, while Anand Rathi Wealth rose 1.2 per cent to ₹2,138.

 

 

Shares of the newly listed National Stock Exchange of India (NSE) also traded higher, gaining 0.3 per cent to ₹1,768.

 

Traders as well as market participants in their feedback to Sebi had sought continuation of the last 30-minute continuous trading session (CTS) volume-weighted average price method before any shift to a blended framework. READ MORE

 

Notably, the CAS mechanism had resulted in a sharp decline in the trading volumes in futures and options (F&O).  

 

Chandan Taparia, head derivatives & technical, wealth management, Motilal Oswal Financial Services, said that the Sebi panel’s recommendation came after receiving extensive feedback from market participants, and this is a positive development for the derivatives market and the capital market as a whole.

 

"The decision has been welcomed by market participants, and we have also seen positive moves in capital market stocks," he said.

 

Over the past two months, Taparia said that markets have seen increased volatility in the last hour of trading due to the CAS and lower liquidity. Derivatives trading volumes, particularly on expiry days, also declined.

 

"Earlier, it was difficult to write options and hold positions until the close because index prices could fluctuate by around 1 per cent due to CAS," he said, adding that traders and market participants will welcome the decision. "Trading volumes will likely pick up again," Taparia noted. 

Disclaimer: Views and outlook in this report belong to the brokerages and analysts cited. They do not reflect the views of Business Standard. Readers are advised to exercise discretion.