The Nifty50 briefly plunged 2.2% during the Closing Auction Session (CAS) on Tuesday, 29 September 2026, touching a low of 22,267 as monthly derivatives expiry amplified intraday swings — before recovering sharply to close only 0.28% lower at 22,716.20. The BSE Sensex similarly pared losses to end 0.33% down at 72,529.07, underscoring how much of the day's drama was concentrated in the closing window.

How the Session Played Out

Bank Nifty also came under severe pressure during the CAS, briefly sliding below 53,300, before recovering to close just 0.4% lower at 54,259.95. The pattern — a sharp intraday dip followed by a near-full recovery — was consistent across indices, pointing squarely at expiry-day mechanics rather than a fundamental change in sentiment. Monthly derivatives expiry has repeatedly amplified volatility around the CAS since the framework was introduced on 3 August to set end-of-day prices for futures and options through a short auction at the close of regular trading.

SEBI's Ongoing Review of the CAS Framework

The wild swings have not gone unnoticed by the regulator. The Securities and Exchange Board of India (SEBI) released a consultation paper earlier this month proposing two alternatives for how expiry-day derivative settlement prices should be determined. The first method combines trades from the last 30 minutes of regular trading with the 10-minute closing auction. The second would temporarily revert to using only the last 30 minutes of regular trading — excluding the closing auction entirely — for at least a year.

Additional proposals in the paper include a ban on traders cancelling orders placed more than 1% above or below the reference price, a reduction of the post-auction derivatives trading window from 10 minutes to 5 minutes, and scrapping the practice of publishing an estimated index closing level during the auction itself.

What the SEBI Chairman Said

SEBI Chairman Tuhin Kanta Pandey clarified in September that the regulator is actively reworking the methodology for determining closing prices under the CAS framework. While acknowledging that the rollout had faced 'initial challenges, particularly around liquidity,' Pandey maintained that the CAS framework 'is here to stay.' He noted that liquidity constraints experienced immediately after implementation tend to ease over time as market participants adapt.

Why This Matters for Traders and Markets

The CAS was designed to make closing prices more representative and harder to manipulate — a goal regulators globally have pursued with varying success. However, traders have argued that the mechanism, especially on derivatives expiry days, is producing abrupt index moves that distort settlement prices and create artificial volatility. This is not purely an Indian problem: several international exchanges that introduced similar frameworks reported liquidity gaps in early months. Notably, the concentration of open interest on monthly expiry days makes Indian markets particularly susceptible to last-minute order imbalances during the auction window. SEBI's willingness to entertain a temporary rollback of the CAS for expiry-day settlements signals that the regulator is prioritising market stability over rigid adherence to the new mechanism.

The market will watch closely for SEBI's final circular on CAS reforms, which is expected in the coming weeks, to determine whether expiry-day volatility is structurally tamed or remains a recurring feature of Indian equity markets.