Cash market volumes fall to five-month low as CAS swings rattle investors

The daily trading volume on the National Stock Exchange (NSE) declined to a five-month low in August, with the average daily turnover falling by ₹3,837 crore, or 3 per cent, to ₹1,16,579 crore in August from ₹1,20,416 crore in July. This decline was attributed to uncertainty surrounding the closing auction session (CAS), significant bearish market sentiment, sharp price volatility, and extensive profit-taking.

The implementation of CAS, which determined the official closing price for eligible stocks in the cash segment through a single-price call auction, replaced the previous 30-minute volume-weighted average price (VWAP) method. The CAS, introduced by SEBI on August 3, initially covered 208 futures and options (F&O)-eligible stocks.

However, it triggered sharp price fluctuations in index constituents, as evidenced by the Nifty plunging 272 points within 30 seconds of its opening on August 26. The BSE Sensex also experienced its sharpest swing since the CAS implementation on August 27, with the index falling by around 2,112 points during the auction before recovering.

The sharp index movements have adversely impacted investor sentiment, leading to reduced cash market exposure, particularly due to the surge in primary market issuances. Former SEBI Chairman UK Sinha acknowledged the need for better preparation and consultation before implementing the CAS framework but expressed confidence that the system would ultimately enhance market surveillance.