Investing.com --Shares of several Indian banks closed at sharply different prices across the country's two largest stock exchanges on Thursday, raising fresh concerns over India's recently introduced closing auction system, Bloomberg reported.
IndusInd Bank Ltd. (NSE:INBK) closed at 1,002.9 rupees on the National Stock Exchange after the 20-minute auction window, compared with 970 rupees on the BSE, where the stock fell more than 3%.
The nearly 33-rupee difference was the widest closing-price gap for the lender between the two exchanges in more than two decades, according to Bloomberg.
Large discrepancies also appeared in shares of AU Small Finance Bank, IDFC First Bank and Federal Bank.
The BSE Bankex index fell as much as 3.3% during Thursday's auction before recovering some losses to close 1.7% lower. The gauge rebounded 1% on Friday.
Thursday also marked the monthly expiry of options contracts linked to the BSE Sensex and Bankex indexes, with thin liquidity contributing to sharp moves in some smaller bank stocks.
The dislocations add to concerns surrounding India's closing auction system, introduced on Aug. 3 and used to determine end-of-day prices for more than 200 stocks.
Market participants told Bloomberg that uncertainty over where shares will close on the NSE and BSE during the auction makes it difficult to arbitrage price differences between the exchanges.
"I trade multiple markets globally and haven't seen such a dislocation where the same stock closes with as much as a 3% gap on different exchanges," Dubai-based hedge fund trader Mayank Bansal said.
The system has also attracted regulatory scrutiny. India's Securities and Exchange Board recently barred two firms, including a JPMorgan Chase (NYSE:JPM) unit, from the market for allegedly manipulating prices during the auction.
Karthik P, a partner at Karna Stock Broking, warned that such volatility could weaken confidence among traders and other market participants.
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