CAS chaos triggers liquidity spiral: Nuvama says higher participation needed to break cycle

The BSE's new Closing Auction Session has experienced weak participation, leading to a sharp decline in option premium volumes and contracts. This thin liquidity has created a self-reinforcing cycle, where low participation exacerbates the problem, making it harder for the market to break free. Nuvama is calling for higher participation to break this cycle, as the current situation is intensifying scrutiny of the new closing-price mechanism. If left unchecked, this could have negative implications for market stability and confidence.

Why it matters

The lack of participation in the Closing Auction Session is causing thin liquidity, which could lead to market volatility. This volatility may negatively impact investor sentiment and confidence in the Indian stock market.

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