The new framework for the Closing Auction Session (CAS) is a major step towards strengthening India's price discovery mechanism, according to the Securities and Exchange Board of India (Sebi).
In its latest annual report, the capital markets regulator said the revamped mechanism will make closing prices in the Indian stock market more reliable.
“This strategic transition marks a significant step in achieving cross-market consistency and enhancing the robustness of India's price discovery mechanism,” Sebi said in the report.
The remarks come just days after the new CAS framework was implemented in the domestic equity market. Since its rollout, the mechanism has led to sharp price movements in the final minutes of trading.
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Traders have raised concerns over sudden end-of-day price swings, and differences between index closing levels and futures prices.
According to Sebi, India's reliance on the volume weighted average price (VWAP) methodology often led to intraday price swings and volatility, particularly during index rebalancing, as the market struggled to absorb large institutional flows in real-time.
“To address these challenges and align with international best practices seen in markets like the NYSE, LSE, and HKEX, SEBI has introduced the closing auction session (CAS),” Sebi said.
Unlike the VWAP approach, which averages trades executed during the last 30 minutes of the continuous trading session in the cash segment, CAS concentrates liquidity into a single and transparent auction. By allowing all buy and sell interests to interact simultaneously, the mechanism facilitates the formation of a single equilibrium price based on the maximum matching of supply and demand.
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“This process ensures lower price disruption and greater execution certainty, providing a more stable and reliable closing price even during periods of high trading volume,” the regulator added.
The new framework came into force on August 03, 2026, with the auction session conducted between 03:15 pm and 03:35 pm. In the initial phase, CAS is applied to stocks in the equity cash segment on which derivative contracts are available.
For all other securities, the closing price will continue to be determined based on the existing 30-minute VWAP methodology.
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