Indian shares slide as oil nears $100; Nifty turns volatile during closing auction

Indian stocks plunged on Tuesday as oil prices neared $100 a barrel due to heightened Middle East tensions, while the Nifty index became increasingly volatile during the closing auction for weekly expiry of derivative contracts. The new Closing Auction Session (CAS) mechanism, introduced on August 3, has heightened volatility on weekly and monthly derivatives expiry days.

The benchmark Nifty 50 index dropped as much as 1.8% during the auction, falling from 3:15 p.m. IST settlement to 0.58% lower at 3,135.1. However, it recovered to close 0.61% lower at 23,635.1. The BSE Sensex fell 0.73% to 75,577.58. HDFC Bank, the largest private lender, saw its indicative close drop as much as 3.91% during the auction, ending regular trading down 0.91% and ultimately closing 1.1% lower.

Gaurav Udani, founder of Thincredblu Securities, noted that CAS has made expiry-day execution less predictable for systematic options strategies, suggesting that limited participation could allow orders to dislocate closing prices. Over the past seven sessions, the benchmark indexes have lost 2.2%, closing lower in six of them. Brent crude rose 1.4% to $98.4 a barrel after Yemen's Iran-aligned Houthi forces attacked Saudi energy facilities.

Financials and private banks suffered losses, with ICICI Bank and Reliance Industries falling 2% and 1.1%, respectively. Heavyweights in the small-caps and mid-caps sectors rose 0.2% each. Defense stocks climbed 2.5% after India approved defense procurement proposals worth 1.1 trillion rupees.