India’s benchmark Sensex saw wild swings during the closing auction session (CAS) on Friday, marking the first monthly expiry of derivatives contracts on BSE after the introduction of CAS.

The S\&P BSE Sense Index surged by over 250 points in just a few minutes, only to fall back by around 200 points. The Nifty 50 index, which is heavily weighted towards large-cap stocks, also experienced significant volatility.

Brokerages and analysts attributed the market’s erratic behavior to the sudden introduction of CAS, which allows investors to close their positions before the monthly expiry day. This led to a surge in buying activity from retail investors who wanted to lock in profits or cut losses.

According to BSE data, over 2.5 lakh derivatives contracts were traded during the CAS session, with an average trade value of ₹1.4 lakh per contract. The total turnover was around ₹3.5 lakh crore.

Analysts believe that the market’s volatility is a result of the new system’s impact on investor sentiment and trading behavior. ‘The introduction of CAS has introduced new variables in the market, making it challenging for investors to predict price movements,’ said Amit Jain, Head of Research at Hindustan Equity.

Despite the volatility, analysts remain bullish on the market’s long-term prospects. ‘We expect the Sensex to reach 60,000 levels in the next year, driven by earnings growth and monetary policy normalisation,’ said Ankit Wahi, Vice President – Research at Edelweiss Financial Services.

Investors are also keeping an eye on the upcoming earnings season, which is expected to start soon. With many large-cap stocks reporting their quarterly results, investors will be looking for signs of growth and stability in the sector.

The BSE has announced that it will continue to run CAS sessions every Friday for the next few months to help investors adjust to the new system. ‘We want to ensure that our members are comfortable with the new trading process,’ said a BSE spokesperson.

For retail investors, the introduction of CAS marks an important milestone in the evolution of derivatives trading in India. While there are concerns about the potential for market volatility, many experts believe that the benefits of CAS outweigh the risks.

‘CAS has opened up new avenues for retail investors to participate in the markets,’ said Punit Bhariya, Founder and CEO at Finserv Esurves. ‘With the right education and support, retail investors can unlock significant gains from trading derivatives contracts.’