Expiry-day moves widen divergence: Nifty ends in the red, Sensex in green

Sebi holds meetings with stockbrokers, seeks suggestions on improving CAS framework

The divergence between the benchmark Sensex and Nifty returned on Thursday, the expiry day for Sensex weekly contracts. As of 3.15 p.m., the benchmark Nifty was down 0.34 per cent, while the Sensex was down 0.13 per cent.

 

The Nifty ended Thursday’s session at 24,396, down 40 points, or 0.16 per cent, while the Sensex ended at 78,080, up 114 points, or 0.15 per cent. The divergence between the two benchmarks stood at 0.31 percentage points (pp).

 

The divergence had been negligible over the previous three days. Even on Tuesday, during Nifty expiry, it was 0.04 pp. Since the closing auction session (CAS) was introduced, the divergence between the two benchmarks has averaged 0.29 pp.

 

 

The divergence was sharper in some Nifty stocks. For example, Bajaj Auto ended at ₹11,730 on the BSE and ₹11,661 on the National Stock Exchange (NSE), a difference of ₹69. Similarly, the difference in closing prices for UltraTech Cement on the two exchanges was ₹44, while for Trent, it was ₹24.

 

“The divergence becomes more perceptible when buy-side activity increases. What changed on Thursday was simply a few additional crores of buying in the cash market across both the BSE and NSE. The Securities and Exchange Board of India (Sebi) has been encouraging brokers to display cash market values more prominently on their platforms in the hope that liquidity and participation will improve. But until participation deepens, this liquidity issue is likely to persist and continue creating challenges for traders,” said a senior executive of a brokerage.

 

According to sources, the market regulator is holding regular meetings with stockbrokers, with the most recent one taking place on Thursday. Sources said the regulator urged brokers to update their systems while also seeking suggestions from them to improve the CAS framework and participation.

 

A day earlier, Sebi Chairman Tuhin Kanta Pandey, speaking on the sidelines of a global commodity conclave, said most top brokers had started showing indicative prices. Those among the qualified stockbrokers that had not yet implemented the facility were expected to provide it to their clients by Friday (August 14).

 

The chairman added that mutual funds’ participation in the CAS had surged from 5-7 per cent to almost 20-25 per cent. He also said participation from proprietary traders was higher around expiry dates. Pandey had emphasised that CAS is a transparent mechanism and that there is a lack of understanding of the new system. It may take time for participation to increase.

 

“There is a push to increase participation in CAS, but it is not so easy to bring it about. There is a difference between the participants among global peers and those in the Indian market. There is also apprehension at this stage. This is a suitability issue. The product is good, but not suitable for India at this point. The ecosystem needs to be prepared; both institutional investors and retail investors need to participate,” said an industry participant.