Nifty 50 Likely to Open in Red After Sharp Previous Session Rally

Nifty 50 Likely to Open in Red After Sharp Previous Session Rally

Aug 4 (Reuters) – India’s Nifty 50 was set to open lower on Tuesday after a sharp late-session rise in the previous session following the launch of a new Closing Auction Session (CAS) framework, ​leaving traders wary of higher volatility.

GIFT Nifty futures were at 24,653.5 as of ‌8:13 a.m. IST, indicating the benchmark Nifty 50 could open below Monday’s close of 24,774.3.

The Nifty and the Sensex  rose 1.6% and 0.7% on Monday, showing a rare divergence after the launch of the new auction ​mechanism for stocks with traded futures and options contracts.

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“Both the exchanges have separate order ​books for CAS session similar to the continuous trading session and hence, the ⁠prices of individual stocks are also different,” NSE said in a statement late on ​Monday.

Under the CAS, continuous trading in eligible shares ends at 3:15 p.m. before the market moves ​into a 20-minute auction that sets the official close.

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The auction price is determined within a plus-or-minus 3% band around a volume-weighted average price, or VWAP, reference price, concentrating more end-of-day execution into a compressed window.

On its ​first day, the auction drew strong participation, with 515 trading members placing orders for 56,773 ​unique PANs, surpassing the long-established pre-open session, and activity is expected to deepen over time, NSE said.

The new ‌structure ⁠could amplify late-session swings by making closing prices more sensitive to large institutional flows, aggressive buying, short-covering and repositioning in heavyweight stocks, said Hariselvan Radhakrishnan, founder and chief executive of HST Wealth.

It could also intensify weekly expiry volatility by concentrating institutional flows, short-covering and position adjustments into ​a narrow closing-auction window, ​two analysts said.

Nifty’s weekly ⁠options expire on Tuesday.

Elsewhere, Asian shares edged higher after Wall Street closed higher overnight. Brent crude rose 0.8% after tumbling 7% on Monday ​to a three-week low.

STOCKS TO WATCH

** The Indian government will sell up to ​a 6.5% ⁠stake in Life Insurance Corporation of India through an offer for sale as the insurer seeks to meet a regulatory requirement to raise its public shareholding

** DLF posts a 4.1% year-on-year rise in June-quarter ⁠profit

** ​India’s food safety regulator issues an order to Dabur India ​prohibiting the sale of food products with misleading “100% natural”, “100% pure” and “100% organic” claims

** SBI Funds Management posts profit rise in first ​quarterly results since its stock market debut