Market indices end four-day winning streak; Nifty loses nearly 160 points

The Indian equity benchmark indices snapped their fourday streak on Tuesday following the introduction of a new auction mechanism for shares having futures and options FampO contractsThe Closing Auction Session CAS in the equity cash segment became operational on Monday introducing a new auctionbased mechanism for determining the closing prices of eligible stocks in a move aimed at making the price discovery process more transparent and robust according to news agency PTIWhat happened to the benchmark indicesThe Sensex fell 21008 points or 027 per cent to settle at 7842895 The Nifty pared its losses towards the later part of the day declining 15940 points or 064 per cent to end at 2461490In the initial trade the benchmark indices were trading on a mixed note The 30share BSE Sensex had jumped 7638 points or 010 per cent to 7871541 in early trade The 50share NSE Nifty had declined 18535 points or 075 per cent to 2458885 during the morning tradeTuesdays weekly expiry combined with the implementation of the new mechanism for determining FampO closing prices has led to a distortion in market trends The significant gap between the 330 pm and 340 pm closing prices of Nifty stocks and the index along with the divergence with Sensex suggests that the new system is not functioning as intended resulting in heightened price volatility This has triggered forced squareoffs of positions particularly among retail investors ahead of the 15 minutes blind derivatives window closing session Vinod Nair Head of Research Geojit Investments saidThese appear to be initial teething issues in the new system and the exchanges and market regulator need to address the discrepancies Currently the impact is limited to the FampO segment of trading stocks and main indices Importantly these are not fundamental structural concerns and are likely to be brought under control The broader economic and financial outlook remains solid and does not alter the view of longterm investors The current volatility is expected to reverse as the exchanges return to their normal operating structure he addedOn Monday due to the CAS mechanism the benchmark indices ended with an aberration The Sensex surged 54439 points or 070 per cent to settle at 7863903 while the Nifty gained 39070 points or 160 per cent to end at 2477430From the Sensex pack Trent Bajaj Finance Bharat Electronics Tata Steel and Mahindra amp Mahindra were among the winners while Hindustan Unilever NTPC HDFC Bank Reliance Industries InterGlobe Aviation and Tech Mahindra were among the laggardsMacroeconomic cuesCrude oil prices rose nearly 25 per cent to around USD 85 per barrel as uncertainty over a diplomatic resolution to the USIran conflict persisted and disruptions to key global shipping routes continued Siddhartha Khemka Head of Research Wealth Management Motilal Oswal Financial Services saidBrent crude the global oil benchmark climbed 249 per cent to USD 8586 per barrel while in Asian markets South Koreas KOSPI Japans Nikkei 225 ended higher while Hong Kongs Hang Seng index settled lower according to PTI Foreign Institutional Investors FIIs bought equities worth Rs 92226 crore on Monday the news agency saidFundamentally the market participants remain focused on developments surrounding the Strait of Hormuz as greater clarity and stability in the region could help ease crude oil prices and support a moderation in global bond yields Meanwhile the ongoing RBI policy meeting is being closely monitored amid global uncertainties and inflation concerns Investors are looking for policy measures from the RBI to address these challenges along with liquidity support for the banking system which could help sustain market confidence in the near term Nair addedWith inputs from PTI