India’s equity derivatives market came under pressure in August as the new Closing Auction Session (CAS) created uncertainty around expiry-day trading. The impact was visible across options activity, with brokers and exchanges seeing lower equity derivatives volumes even as commodity trading and parts of the cash-market ecosystem performed better.
In its September 2 report, Capital Markets Monitor: August Was All About CAS, Jefferies said the number of equity option contracts traded fell 30% month on month in August. Index options premium average daily turnover (ADTO) declined 20% month on month to Rs 53,900 crore, the lowest level since February 2025. Cash contracts also fell 11%.
Despite the weakness in equity derivatives, Jefferies retained Groww, Multi Commodity Exchange of India (MCX), KFin Technologies and Nuvama Wealth Management as its preferred picks, with all four rated ‘Buy’. The report does not provide fresh target prices or upside percentages for these stocks.
CAS hits expiry-day trading: What changed and why it matters
The Securities and Exchange Board of India (SEBI) introduced the Closing Auction Session from August 2026, replacing the earlier volume weighted average price (VWAP) mechanism.
The first month brought a clear problem. Jefferies said CAS resulted in greater volatility towards the end of the trading day because auction pools remained shallow. The auction pool was only around 1% of cash-market ADTO, leaving limited liquidity during the closing process.
The biggest concern emerged on expiry days. Jefferies’ discussion with an options trader found that uncertainty around the closing auction was forcing option writers to stay away from the market. That reduced liquidity and also hurt the profitability of proprietary traders.
The brokerage believes the problem could be addressed through three changes: de-linking options expiry from the CAS window, improving the stock lending and borrowing mechanism, and deepening the auction pool.
The effect was visible across the derivatives market. Industry index options premium ADTO declined 20% month on month in August, while equity option contracts traded fell 30%. Index futures and stock futures and options also recorded lower activity.
The weakness was concentrated in derivatives, however. Industry cash ADTO remained flat month on month in August after two consecutive months of decline.
BSE feels the pressure in options, but cash-market share rises
BSE was among the companies directly affected by weaker equity-options activity.
Its August cash-market ADTO fell 26% month on month to Rs 18,700 crore, with Jefferies attributing the decline to CAS and an additional expiry in the comparison base.
At the same time, BSE’s cash-market share increased by 50 basis points to 8.1%, marking its second consecutive monthly rise.
Its index-options premium market share, however, declined to 34.7% in August. Sensex premium ADTO also fell 27% month on month, partly because August had one fewer expiry.
This left BSE with two different trends in August: stronger cash-market share but weaker options activity.
Groww: Client additions stay strong despite derivatives pressure
Groww was also affected by the slowdown in equity derivatives, but its client franchise continued to expand.
Jefferies said Billionbrains Garage Ventures Ltd. added around 70,000 active clients on the National Stock Exchange (NSE) in July even as the broader industry lost clients. Its share of active NSE clients rose to 29%, compared with 26% a year earlier.
Its digital user base also remained stronger than peers. Groww’s mobile app users increased 9% year on year in July, while unique visitors across web and mobile rose 4% year on year.
Groww’s August operating data showed total transacting users increasing 1.4% month on month to 2.3 crore. Total customer assets rose 3.8% to Rs 3.76 lakh crore, while mutual fund assets increased 4.7% to Rs 2.10 lakh crore.
The pressure was visible in trading activity. Equity derivatives premium turnover fell 24% month on month in August, while the margin trading facility (MTF) book remained broadly flat as Groww focused more on risk management.
Jefferies’ valuation comparison puts Groww at around 1.2 times on a price-to-earnings-to-growth (PEG) basis, among the lower valuations in its capital-market peer group.
MCX: Bullion trading drives a sharp August recovery
Multi Commodity Exchange of India Ltd. moved in the opposite direction from equity derivatives during August.
The exchange’s options ADTO increased 15% month on month, while futures ADTO rose 32%. Bullion was the main driver, with bullion option premiums increasing 88% month on month and bullion futures volumes rising 52%.
The rally in gold prices also increased bullion’s contribution to MCX’s options activity. Bullion accounted for 38% of options premium ADTO in August.
The stronger bullion mix brought MCX’s premium-to-notional-turnover ratio down to 69 basis points from 102 basis points in July.
The rise in commodity activity provided a sharp contrast to the pressure on equity derivatives during the month.
Nuvama: Valuation makes it a Jefferies favourite
Nuvama remains one of Jefferies’ preferred capital-market stocks, with valuation standing out in the brokerage’s peer comparison.
On a PEG basis, Jefferies puts Nuvama at around 1 times, the most reasonable level among the capital-market companies shown in its comparison. Groww follows at around 1.2 times, while other peers are in the 1.6-2.9 times range.
The same comparison places Nuvama among companies with strong expected earnings growth, supporting its position on Jefferies’ preferred list.
KFin Technologies: Jefferies keeps the stock among its preferred picks
KFin Technologies is the fourth stock in Jefferies’ preferred list.
The report provides less company-specific operating detail for KFin than it does for Groww or MCX. However, Jefferies includes KFin among its preferred picks and gives it a ‘Buy’ rating. The stock also appears in the brokerage’s capital-market peer valuation comparison.
Mutual funds: Equity flows slow as small-caps attract record inflows
The asset-management industry also saw mixed trends in July.
Net equity flows, excluding arbitrage and new fund offers (NFOs), declined 18% month on month to Rs 30,000 crore, equivalent to 0.7% of operating assets under management (AUM).
Systematic investment plan (SIP) flows grew 12% year on year and 1% month on month to Rs 32,000 crore, while lump-sum flows turned negative. Small-cap flows reached a record level, whereas large-cap funds saw outflows for the first time since December 2023.
ICICI Prudential Asset Management Company and HDFC Asset Management Company lost net-flow market share, while Nippon Asset Management continued to gain share. SBI Funds Management’s net-flow share remained in line with its six-month average.
Among the 15 active equity schemes receiving the highest net flows, SBI Funds Management had three schemes, while HDFC Asset Management and Nippon Asset Management had two each. SIP assets as a share of equity AUM continued to rise and reached 38% in July.
Depositories: IPOs, demat additions and deliveries improve
Activity was more positive in the depository segment.
Mainboard initial public offerings (IPOs) increased to 18 in August from 13 in July. Demat account additions rose to 29 lakh in July from 26 lakh in June, while average delivered quantities increased 10% month on month in August.
The data suggests that cash-market participation remained healthier even as derivatives activity came under pressure.
Conclusion
Jefferies’ preferred list comprises Groww, MCX, KFin Technologies and Nuvama Wealth Management, all carrying a ‘Buy’ rating.
The 4 stocks offer exposure to different parts of the capital-markets business. Groww continues to add clients despite weaker derivatives activity, MCX benefited from stronger bullion trading, Nuvama screens favourably on valuation, while KFIN Technologies Ltd. remains a preferred name within Jefferies’ coverage.
The next few expiry cycles will show whether trading activity recovers as participants become more accustomed to CAS or whether changes are needed to the mechanism. For now, Jefferies sees expiry-day uncertainty and shallow auction liquidity as the key issues weighing on equity derivatives.
Disclaimer: This article is based on Jefferies’ Capital Markets Monitor: August Was All About CAS dated September 2, 2026. Ratings, price targets, estimates and brokerage views are subject to change and aren’t guarantees of future performance. This article is for informational purposes only and shouldn’t be treated as investment advice or a recommendation to buy or sell any security.