The National Stock Exchange’s closing auction session (CAS) received a huge boost on Monday, as the MSCI index rebalance saw the turnover zooming to a record nearly Rs 40,000 crore and pushing almost a third of the stocks traded in the auction to their daily price limits of 3%.
A massive 678.11 million shares worth Rs 39,718 crore changed hands during the 15-minute closing auction between 3:15 pm and 3:30 pm, as institutional investors routed MSCI rebalancing trades through the new mechanism.
The scale of the surge was unprecedented. Since CAS was introduced on August 3, the session had averaged volumes of just 21.57 million shares and turnover of Rs 1,196 crore. Monday’s turnover was more than 30 times that average, while volumes were over 31 times higher.
The earlier volume peak was 33.66 million shares on August 12, while the previous turnover high was Rs 1,638 crore on August 18.
Tejas Shah, head of trading at Equirus Securities, said institutional investors routed large MSCI index-adjustment orders through the CAS window to minimise tracking errors, resulting in a sharp surge in high-value liquidity.
According to him, He added that the smooth execution of such large orders could help build investor confidence in the new mechanism and draw more participants into the closing auction. However, stock-specific volatility could remain elevated until liquidity deepens further.
Of the 210 stocks traded in the NSE CAS on Monday, 60 — nearly three in every 10 — touched the daily 3% price limit allowed during the auction. As many as 47 stocks hit the 3% upper limit, while 13 touched the lower limit.
“CAS volumes were significantly higher on expiry days, suggesting that event days do attract trading interest. Therefore, it is not surprising that MSCI rebalancing-related flows attracted additional liquidity,” said Anand James, chief market strategist at Geojit Investments.
Eternal dominated the closing auction both by volume and value, with 201.9 million shares worth Rs 6,626 crore changing hands. Laurus Labs, Reliance Industries, Adani Energy Solutions and Adani Enterprises were among the other most actively traded stocks by value.
Reliance Industries also featured among the most traded stocks by volume, alongside Vodafone Idea, GMR Airports and Yes Bank.
The Nifty gained 30.15 points, or 0.13%, during the CAS before settling at 24,080.40, down 95.25 points, or 0.39%, for the day.
The impact was far more dramatic on the Bank Nifty. The banking index jumped 628.60 points, or 1.09%, during the closing auction to finish at 58,024.95 — up 528.65 points, or 0.92%, from its previous close of 57,496.30.
At 3:15 pm, when normal trading ended, the Bank Nifty had actually been down 98.95 points, or 0.17%, at 57,397.35. The closing auction therefore transformed what had been a losing session for the index into a gain of nearly 1%.
The MSCI-driven activity spilled over into the broader cash market as well. NSE cash-market turnover surged 64.2% to Rs 1.82 lakh crore, its highest level in two months.
Sebi Chairman Tuhin Kanta Pandey recently described CAS as a microstructural reform modelled on closing mechanisms already used in developed markets including Japan, the US, Germany and Australia, as well as several European markets.
Pandey had also pointed to growing institutional adoption of the mechanism, saying mutual funds’ participation in CAS had risen from around 7% to more than 20%. By arriving at a single closing price through an auction, the mechanism is expected to help passive funds execute trades closer to the price used for calculating their NAVs and thereby reduce tracking errors.