The market regulator has changed how derivative contracts are settled, shifting to a 30-minute average price instead of the closing auction. While this move aims to stabilize expiry days, the market faces continued pressure from high crude oil prices and heavy selling by foreign institutional investors. Investors are also weighing mixed quarterly results from major companies like Wipro and Tech Mahindra.
The Securities and Exchange Board of India has introduced a change to its derivative settlement policy, aiming to reduce price swings on contract expiry days. Going forward, the regulator will use the volume-weighted average price from the final 30 minutes of regular trading to settle contracts. This replaces the previous system, which relied on the closing auction session. By basing the settlement price on a longer window of trading activity rather than a single auction period, the regulator intends to address industry concerns regarding liquidity and sudden price movements at the end of the day.
Market participants are balancing this regulatory change against broader economic signals. A drop in US Treasury yields has provided some relief to risk assets, offering a potential cushion for equity markets. However, the macro environment remains challenging. Brent crude oil prices are hovering near $106 per barrel, driven by ongoing tensions in the Middle East. High energy costs typically act as a drag on profit margins for many Indian companies and keep inflationary pressures high, which may continue to limit the current market recovery.
In the corporate sector, performance has been inconsistent. Tech Mahindra reported a revenue beat for the July-September period and reaffirmed its margin guidance for fiscal 2027, signaling steady operations. In the financial services sector, HDFC Life Insurance saw profit growth supported by a rise in policy sales through HDFC Bank, while Jio Financial Services expanded its operating profit, largely driven by growth in its lending segment.
Conversely, Wipro has presented a more cautious picture for investors. While its quarterly revenue narrowly exceeded analyst estimates, the company reported that its deal bookings fell to a four-year low. This decline in new orders suggests potential difficulty in maintaining future growth and market share, a factor investors will likely track closely in the coming quarters.
Adding to the uncertainty is the ongoing trend of selling by foreign institutional investors. Data indicates these investors sold a net 52.85 billion rupees in equity on a single day, continuing a year-to-date trend of significant outflows exceeding $32 billion. Investors may continue to monitor how these capital flows, along with oil price volatility and the impact of the new SEBI settlement rules, influence market sentiment in the sessions ahead.