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The introduction of a new closed auction mechanism for determining stock prices in the Futures and Options (F&O) segment led to an unusually large gap between the Sensex and Nifty indicators on Monday. Market participants attribute this to the dynamics of the auction and the level of liquidity.

On Monday, the session concluded with the Sensex and Nifty benchmarks showing a difference of 0.9 percentage points (90 basis points). The Sensex closed at 78,639, demonstrating a rise of 544 points or 0.7 percent. Meanwhile, Nifty finished trading at 24,774, increasing by 391 points or 1.6 percent. At 3:15 PM, Nifty was trading at 24,573.35, but ultimately closed 0.82 percentage points higher.

The sharp divergence in the closing levels of both indices caused confusion among market participants. Prakarsh Ghadani, founder of Soaring Peaks Capital, suggested that the cause of this discrepancy was the new closed auction mechanism, not manipulation. He noted that under the revised system, orders could be placed within a 3% price range, and on the first day, some participants might have submitted buy orders at a price higher than the current market price in Nifty stocks with significant weight. Even a 1–1.5% increase in the auction price for major index constituents can significantly raise the Nifty closing level.

Ghadani also added that Nifty experienced a sharper jump because the NSE has significantly greater liquidity in the money market and attracts a larger share of orders from institutional and mutual funds. He explained that concentrated activity in the auction for high-weight NSE stocks had a much greater impact on Nifty than comparable operations on Sensex. Previously, when the closing price was based on the weighted average over the last 30 minutes, both indices usually moved in sync; the new auction-based process created the possibility of temporary misalignment, especially on the first day.

Typically, the two benchmarks—Nifty and Sensex—move in alignment, and any divergence is usually minor. Since January 2000, there have been 75 instances where the difference between BSE Sensex and Nifty 50 exceeded 91.5 basis points in a single day. The last time both indices showed such a sharp divergence was on March 26, 2020, making Monday's close the second largest divergence between the closing levels of both indices since 2010. The largest divergence was recorded on April 25, 2000, when the difference reached 257 basis points.

A senior official from a brokerage firm, who wished to remain anonymous, linked the sharp jump in Nifty during the closed auction to a significant mismatch between buy and sell orders, which could have been triggered by fund flows related to SIP mutual funds. This official noted that since it was the first session under the new closed auction mechanism, many arbitrageurs and liquidity providers might have refrained from participating while assessing the system's performance. This could have led to a significantly higher number of purchases than available shares for sale.

A CIO of a mid-sized fund called the sharp fluctuations in Nifty during the closed auction an unexpected event, although initial teething problems were not entirely unforeseen given such a major change in operational processes. He predicts that stock prices will return to normal when the market opens on Tuesday. He stated that if today's closing price does not reflect fair value, the market will correct itself upon resuming trading the next day. Discovering a new opening price will help narrow the gap, and the divergence is likely to be corrected during trading.

This CIO also mentioned that the immediate implications for mutual funds relate to the calculation of Net Asset Value (NAV). He explained that funds are obligated to calculate NAV using the prescribed valuation methodology and cannot unilaterally determine the fair closing price. The valuation process is automated and generally relies on the closing price of the exchange with the highest trading volume, which is usually the NSE.

Another CIO noted that the consequences would have been more significant if this had occurred on an expiry day. He emphasized that if it happened on an expiry day, it could lead to substantial gains for some participants and equally large losses for others, as settlement values would be affected. Introducing the mechanism on a non-expiry day limited immediate negative consequences. Nifty derivative contracts expire every Tuesday.

NSE did not respond to inquiries regarding the sharp jump in Nifty on Monday. The closed auction session is a new method of determining stock prices, initially introduced for stocks in the F&O segment. If a stock is not in the F&O segment, this pricing mechanism does not apply. Instead of calculating the closing price based on the Volume Weighted Average Price (VWAP) over the last 30 minutes of trading, exchanges now collect buy and sell orders after the regular trading session ends and match them at a single equilibrium price where the maximum number of shares can be traded. This price becomes the official closing price. This mechanism is expected to make closing prices more reflective of actual supply and demand, improve the price discovery process, and limit the impact of large last-minute trades.

Torrent Power announced on Monday a decline in its net profit by 11% in the first quarter of the fiscal year 27. Profit amounted to 662 crore rupees, compared to 742 crore rupees for the same period last year. Despite this, operating revenue increased by 3%, reaching 8,124 crore rupees from 7,906 crore rupees the previous year.

The company noted that despite the challenging operational environment marked by geopolitical turmoil affecting LNG supplies and consequently the operation of thermal power plants, it demonstrated a 2% growth in EBITDA during the quarter.

It was added that the June quarter was characterized by improved operational performance in the distribution units and the company's renewable portfolio. This growth is attributed to higher capacity utilization rates and the contribution of projects commissioned in the previous year. Furthermore, profitability suffered due to increased financial costs resulting from higher borrowings for investments in under-construction assets.

The company's total installed generating capacity is 6.6 gigawatts peak power (GWp). This capacity includes 2.7 GW of gas power, 2.1 GWp of renewable power, and 1.8 GW of coal power. Renewable projects of approximately 4.2 GWp, a 3 GW pumped storage facility, and 1.6 GW of coal power are currently under development.

During the reporting period, Torrent Power acquired 100% of the equity and convertible instruments of Nabha Power Limited (NPL) for an amount of 3,632 crore rupees, making NPL a wholly-owned subsidiary. NPL operates a 2x700 MW supercritical coal-fired thermal power plant in Punjab and supplies electricity under long-term power purchase agreements with Punjab State Power Corporation Limited.

Jindal Stainless Ltd (JSL) reported on Monday a 7.6% year-on-year increase in consolidated net profit for the first quarter of the fiscal year 2027 (FY27). This growth was achieved through increased revenue and a more favorable product mix, which helped offset production disruptions caused by industrial gas shortages following the Middle East crisis.

The country's largest stainless steel producer by revenue recorded a consolidated profit after tax (PAT) of ₹769 crore for the quarter ending June 30, compared to ₹715 crore the previous year. Revenue from operations increased by 10.5% to ₹11,279 crore, and earnings before interest, taxes, depreciation, and amortization (Ebitda) grew by 1.5% to ₹1,329 crore.

Nevertheless, sales volumes of finished products decreased by 7.3% year-on-year, totaling 580,805 tonnes. This was due to restrictions on propane and LPG availability that forced the company to temporarily reduce production.

Details on the impact of the crisis

Managing Director Abhidhudai Jindal stated during a press conference following the results announcement that the war was the primary cause of the disruptions. He noted that the company is heavily reliant on LPG and propane, much of which comes from the Middle East. The first few weeks of the quarter were marked by serious interruptions in production processes, but he added that domestic demand remained stable, and the volume reduction was entirely linked to supply issues.

Chief Executive Officer Tarun Hulbe reported that both plants—in Odisha and Hisar—were affected by LPG supply restrictions and logistical difficulties. The company has already installed piped natural gas at its Odisha facility, which has helped normalize production, although the geopolitical situation remains uncertain.

Despite the decline in production volumes, the company's profitability remained resilient as management shifted the sales focus towards higher-value products. Jindal stated that it intentionally reduced dependence on low-margin raw material grades and prioritized supplying higher-margin customer segments to protect profits during the disruptions.

The company noted that demand remains strong in the automotive, railway, infrastructure, manufacturing, and consumer markets. Sales of specialized grades for the energy and oil and gas sectors also increased. Exports accounted for 11% of total sales in the quarter, up from 9% the previous year.

Management clarified that the increase in export share does not reflect a strategic shift to foreign markets; export volumes remained roughly unchanged, and the higher percentage was due to lower domestic production during the quarter.

Looking ahead, the company maintained its FY27 volume growth forecast within 7-9%, stating that it will revise its revenue expectations for the second half of the year if geopolitical conditions become clearer.

Regarding exports, Jindal acknowledged that stricter protectionist quotas from the European Union will lead to reduced supplies to Europe. Nevertheless, the company expects to compensate for this by expanding sales to markets such as Japan, South Korea, Brazil, and Mexico.

Commenting on trade policy, Jindal mentioned ongoing discussions with the government regarding quality control measures and anti-dumping measures against imports of stainless steel from certain Asian countries. She expressed hope that the government would soon appoint anti-dumping verifiers and that the temporary suspension of the Quality Control Order (QCO), effective until March 2027, would not be extended.

Hulbe noted that fuel prices have stabilized compared to the peak observed during the Middle East crisis, although key raw materials like nickel and chromium remain volatile. The company continues to pass on changes in raw material costs to customers with a certain delay.