India’s equity-market close is about to align with major global peers. For arbitrage funds, that could come at a cost. The National Stock Exchange and Bombay Stock Exchange are introducing a closing auction mechanism designed to improve price discovery and reduce volatility at the end of the trading day.

This move mirrors practices seen at exchanges like the New York Stock Exchange and London Stock Exchange, where closing auctions have long been a fixture. Arbitrage funds, which profit from price discrepancies between cash and derivative markets, may face thinner margins as the new mechanism narrows those gaps. Industry observers note the shift could reshape trading strategies for India-based funds that rely on end-of-day pricing inefficiencies.

The transition is expected to unfold over the coming quarters as exchanges finalize implementation details and market participants adjust.