On August 27, the Sensex plunged over 2,000 points within minutes
GS3Economy · S&T · Environment · Security· Capital markets & SEBI· Prelims + Mains·
Why in news
The Sensex experienced a sharp plunge of over 2,000 points during the newly introduced Closing Auction Session (CAS) on August 27, leading to calls for a SEBI inquiry.
Background
The Sensex fell from approximately 77,200 to 74,983 within 6 minutes during the CAS. The CAS replaced the Volume-Weighted Average Price (VWAP) method for determining closing prices starting August 3.
Facts for Prelims
- FactSensex plunged over 2,000 points in minutes on August 27 during the CAS.
- S&TClosing Auction Session (CAS) aggregates buy and sell orders to discover a single equilibrium price.
- FactThe Sensex ended the day down 539 points (0.7%) at 76,934.
- BodySEBI (Securities and Exchange Board of India) is the regulatory body overseeing these market mechanisms.
For Mains
Q. Discuss the challenges associated with market liquidity and price discovery mechanisms in the Indian capital markets. How can regulatory bodies ensure stability during transition periods?
Dimensions to cover in your answer
- liquidity constraints post-3:15 pm
- price discovery mechanism (CAS vs VWAP)
- regulatory oversight by SEBI
- market volatility and systemic risk
Keywords: liquidity · price discovery · market volatility · equilibrium price · regulatory oversight
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