Explained: Sensex's CAS Swing And The Viral ₹1 Lakh To ₹44 Lakh Claim

On the afternoon of August 27, in the last ten minutes before markets closed, the Sensex did something unusual. Between 3:20 pm and 3:30 pm, the index fell by more than 2,200 points, then clawed back nearly 2,000 of those points before the session ended.

The swing happened during the market's Closing Auction Session (CAS), a new mechanism introduced by the BSE and NSE less than a month earlier, and on a day that also marked the first monthly derivatives expiry since CAS came into force.

The episode did not go unnoticed. Reliance Industries, the Sensex's most heavily weighted stock, dropped from around ₹1,289 to ₹1,250 in just seven minutes before recovering to close at ₹1,286. HDFC Bank, ITC and Bharti Airtel saw similarly sharp moves in the same window. By the next morning, the volatility had drawn the attention of former BJP MP and chartered accountant Kirit Somaiya, who wrote to SEBI Chairman Tuhin Kanta Pandey demanding an inquiry.

A Letter And A List Of Questions

In his letter dated Friday, August 28, Somaiya described the movement as "unusual" and asked SEBI to treat it with urgency. He raised a set of pointed questions: did the swing reveal a weakness in how CAS was designed, did it happen knowingly, and could it even amount to an attempt to sabotage the mechanism. He asked SEBI not to treat the matter "casually" and called on the officials who built the framework to explain what went wrong. Speaking to Moneycontrol after sending the letter, Somaiya said SEBI must review and, if necessary, redraft the policy, and take action against anyone found to have manipulated prices.

Attached to the letter was a technical note from an unnamed observer, laying out why the mechanism might be structurally weak. The note argued that CAS removes liquidity at the exact moment it matters most. Continuous trading in CAS-linked stocks stops at 3:15 pm and is replaced by a separate auction, even as derivatives on those same stocks keep trading until 3:40 pm. That gap, the note said, weakens the link between the cash and futures markets right as the closing price is being formed.

It also pointed to a split between exchanges. On the day CAS was rolled out, auction turnover came in at around ₹1,276 crore on the NSE against just ₹10.8 crore on the BSE, a gap the note cited as evidence of how thin liquidity is on one side of the market. Because closing prices feed into mutual fund NAVs, index levels and derivatives settlement, the note argued that CAS needs stronger minimum liquidity conditions before it can be relied upon. It warned that if large institutions view the auction as unreliable, they may simply trade before 3:15 pm instead, thinning out the auction further and creating what it called a "negative liquidity flywheel."

A Viral Number Enters The Chat

As the letter circulated, so did a claim on social media. A trader posted that a hypothetical ₹1 lakh investment in a Sensex put option could have turned into ₹44 lakh in just five minutes on August 27, buying Sensex 76,500 puts at 3:15 pm and selling at 3:20 pm. The post appeared to contain a typo, marking the time as 3:15 am rather than pm, but the number spread regardless.

Eshaan Lazarus, founder and CEO of 021 Trade, said the arithmetic behind the claim was not implausible, even if the trade itself was unlikely to have actually happened.

He explained how CAS works: regular trading in CAS-linked stocks ends at 3:15 pm, after which a reference price is set using the volume-weighted average of the previous 15 minutes. Between 3:20 pm and 3:30 pm, traders can place orders within 3% of that reference price, but nothing executes. The auction then closes at a random moment between 3:28 pm and 3:30 pm, with the exchange settling on whichever price allows the most shares to change hands. Derivatives, meanwhile, keep trading until 3:40 pm and settle against that same auction price, which Lazarus said can swing sharply when volumes are thin, as they have been.

He pointed to SEBI's finding from August 13, an earlier weekly expiry day, when one foreign entity accounted for 86.6% of all buying in the 30 Sensex stocks during the auction.

On August 27 itself, he noted, a 76,900 put option moved from ₹4.70 to ₹200 before expiring worthless, a swing large enough to make a 40-times return "possible in theory," since options nearing expiry cost very little and even small index moves can multiply sharply.

But Lazarus said the viral ₹44 lakh figure rested on a hypothetical scenario. Order limits would have split the ₹1 lakh trade into 22 separate orders, each needing a matching counterparty at precisely the right second, making the outcome unlikely in practice. He suggested that SEBI could consider closing derivatives trading at 3:15 pm alongside the cash market, removing the incentive for such swings altogether.

Vikas Gupta, CEO and strategist at OmniScience Capital, offered a similar caution. He said gains of that scale are possible with leveraged instruments under favourable conditions, but rare in practice. During the CAS window, he explained, bid and ask prices shift continuously without any trade actually executing, producing an "indicative equilibrium price" that keeps changing until a single price is finally struck. That process, he said, makes options prices highly volatile through the session, and the feedback loop between CAS and the derivatives market adds to the risk. He described the setup as better suited to high-frequency algorithmic trading than to retail investors and said retail traders would be better off staying away rather than chasing claims of outsized returns.

Not The First Time SEBI Has Looked At CAS

The August 27 episode was not an isolated flashpoint. Just two weeks earlier, on August 13, also a weekly expiry day, SEBI had passed an ex-parte interim order against Copthall Mauritius Investment, an entity linked to JPMorgan, and Mansi Stock & Share Broking, over alleged manipulation of the Sensex and its constituent stocks during the CAS window. SEBI's investigation had found three sharp spikes in the Sensex's indicative equilibrium price within a matter of minutes. The regulator barred both entities from the relevant trading activity and ordered them to give up close to ₹3.68 crore in alleged wrongful gains.

Since CAS was introduced on August 3, both the Sensex and Nifty have seen unusually large price movements in the window between 3:15 pm and 3:30 pm, according to the report. Somaiya's letter and the accompanying technical note argue that these repeated episodes, especially on expiry days, warrant a review before the system becomes permanently entrenched.

For now, though, SEBI has given no indication that a review is coming. The regulator's chief has publicly maintained that there are no plans to roll back CAS.