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Sensex, Nifty Edge Higher as Services PMI Hits 3-Month High; SEBI Eyes CAS Reversal

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Indian equity benchmarks are trading with marginal gains today, extending Monday's recovery, as investors digest fresh economic data and key regulatory developments. The HSBC India Services PMI for September rose to a three-month high of 55.2, indicating robust domestic demand, while reports suggest SEBI is considering a partial reversal of its Closing Auction Session (CAS) framework for derivatives settlement. Despite a positive market opening, elevated Brent crude prices above $100 per barrel and a weakening rupee continue to pose macro headwinds, with foreign institutional investors remaining net sellers.

Key highlights

• HSBC India Services PMI: Rose to a three-month high of 55.2 in September, driven by stronger domestic demand, though quarterly growth was the weakest since March 2022.
• SEBI Regulatory Review: The market regulator is reportedly considering stopping the use of the Closing Auction Session (CAS) framework for derivatives settlement prices for at least a year.
• Trent Shares: Surged by approximately 10% in early trade after the company projected a 23% year-on-year rise in standalone revenue for the second quarter of FY27.
• Banking Sector Updates: Axis Bank and Kotak Mahindra Bank reported strong Q2 business updates, with gross advances increasing 22.7% and 24.7% year-on-year respectively, leading to early stock gains.
• Crude Oil & Rupee: Brent crude remains above $100 per barrel, while the Indian Rupee weakened to 96.586 against the US Dollar, adding pressure on India's import bill.

SEBI Considers Reversal of CAS Framework for Derivatives Settlement

The Securities and Exchange Board of India (SEBI) is reportedly considering a significant change to its Closing Auction Session (CAS) framework, potentially halting its use for derivatives settlement prices for at least a year. This move would mark a partial reversal of the mechanism introduced in August 2026, which aimed to enhance price discovery for key stocks and derivative contracts. According to reports citing sources familiar with the matter, the regulator may revert to using the Volume Weighted Average Price (VWAP) of trades executed during the last 30 minutes of the Continuous Trading Session (CTS) for determining derivative pricing.

The CAS framework was implemented in the equity cash segment for stocks with futures and options (F&O) contracts, effective August 3, 2026. Its objective was to facilitate efficient and transparent price discovery of closing prices. However, SEBI's initial experience and feedback from various stakeholders and market participants highlighted the need to review certain aspects related to CAS and the settlement methodology for derivatives. A consultation paper was issued on September 12, and by October 3, SEBI had received approximately 20,000 comments.

Market participants had expressed concerns regarding the concentration of derivatives activity towards the close of the trading session under the CAS framework. The average traded value per minute during the 3:20 PM to 3:30 PM period reportedly increased significantly on both NSE and BSE compared to the pre-CAS period. While the closing auction will still be used to determine the end-of-day price for underlying stocks in the cash market, the proposed change for derivatives settlement reflects the regulator's responsiveness to market feedback. The potential implementation of these changes could occur as early as this month.

India's Services PMI Hits Three-Month High in September, Domestic Demand Fuels Growth

India's dominant services industry expanded at its fastest pace in three months in September 2026, with the HSBC India Services Purchasing Managers' Index (PMI) rising to 55.2 from 54.1 in August. This robust growth was primarily driven by stronger domestic demand across financial, consumer, and digital services. A PMI reading above 50.0 indicates expansion in business activity.

Despite this monthly acceleration, the overall picture for the July-September quarter appears less optimistic, as the quarterly average for services growth was the weakest since March 2022. This moderation is attributed to a softening in hiring activity and a weakening export momentum. New business, a key gauge of demand, increased at its quickest pace since June, largely supported by domestic customers. International demand, however, showed less strength, with export order growth slowing to its weakest in nearly three years.

On the inflation front, input cost inflation eased to its lowest level in 10 months, while fees charged to customers rose at their slowest pace since June. Business confidence also improved to a three-month high, though it remains subdued historically, with only about 16% of firms expecting activity to increase over the next year. The services upturn, combined with accelerating manufacturing growth (which hit a seven-month high in September), lifted the India Composite PMI to a three-month high of 55.9 from 54.3 in August. However, its quarterly average was also the weakest since January-March 2022, tempering signs of a broad-based recovery.

More stocks and market news

Trent: Q2 Revenue Projection Drives 10% Surge

Shares of Trent Limited, the retail arm of the Tata Group, surged by approximately 10% in early trade today, following a positive business update for the second quarter of the financial year 2027. The company projected a 23% year-on-year rise in its standalone revenue for the September quarter. This strong performance indicates robust consumer demand in the retail segment and has boosted investor confidence in the company's growth trajectory.

Banking Sector: Axis Bank and Kotak Mahindra Bank Report Strong Q2 Business Updates

Major private sector lenders, Axis Bank and Kotak Mahindra Bank, witnessed gains in early trade after releasing their Q2 FY27 business updates. Axis Bank reported a significant 22.7% year-on-year increase in gross advances and a 20.7% year-on-year growth in total deposits. Similarly, Kotak Mahindra Bank's net advances rose by 24.7% year-on-year to ₹5.77 lakh crore, while CASA deposits increased by 11.3% year-on-year. These strong credit and deposit growth figures signal a healthy performance within the banking sector.

Market context

Indian equity markets opened with marginal gains today, with the Nifty 50 trading around 22,593.80, up 0.19%, and the BSE Sensex at 72,645.02, up 0.36%, as of 9:56 AM IST. This follows a recovery on Monday, which snapped an eight-week losing streak for the benchmarks. Global cues were largely supportive, with Asian markets trading higher after a tech-led rally on Wall Street. However, Brent crude oil prices remain elevated, hovering above $100 per barrel, while the Indian Rupee weakened to 96.586 against the US Dollar. Foreign Institutional Investors (FIIs) continued to be net sellers on Monday, offloading ₹4,699.10 crore, while Domestic Institutional Investors (DIIs) provided support with net purchases of ₹5,181.60 crore.

Why these stories matter

The potential reversal of SEBI's CAS framework for derivatives settlement is crucial as it directly impacts market liquidity and pricing mechanisms for a significant segment of the market, reflecting regulatory responsiveness to industry feedback. The Services PMI data provides a vital snapshot of India's economic health, highlighting the resilience of domestic demand despite global headwinds and offering insights into inflationary pressures. Strong Q2 updates from retail giant Trent and major private banks like Axis Bank and Kotak Mahindra Bank underscore the buoyancy in consumer spending and the financial sector's robust credit growth, which are key pillars of India's economic narrative. The persistent elevation of crude oil prices and the weakening rupee, however, remain critical macro concerns that could influence inflation and the country's current account deficit.

What to watch next

• RBI Monetary Policy Committee (MPC) Decision: The Reserve Bank of India's policy decision is due on October 7, with market consensus largely anticipating a 25 basis points rate hike.
• Q2 FY27 Earnings Season: Investors will closely monitor upcoming quarterly results, particularly from IT majors like TCS, for further cues on corporate performance and sector outlook.
• Global Crude Oil Prices: Continued monitoring of international crude oil movements will be essential given its direct impact on India's economy and inflation.
• FII Flows: The trend of foreign institutional investor activity will be a key indicator of global sentiment towards Indian markets.

Sources

• Investing.com: HSBC's India Services PMI rose to 55.2 in September from 54.1 in August, but came in below a preliminary estimate of 55.8.
• Reuters: India services growth at 3-month high, but quarter weakest since 2022, PMI shows
• Business Today: SEBI may partly reverse CAS rules after pushback, says report
• Financial Express: Sensex today | Nifty 50 | Stock market Today at open: The benchmark indices opened with slight gains today, October 6.
• Moneycontrol: Indian shares inch higher, led by banks and Trent on positive quarterly updates

FAQ

1. What is the latest update on India's services sector?

India's services sector, as measured by the HSBC India Services PMI, expanded to a three-month high of 55.2 in September 2026. This growth was primarily fueled by strong domestic demand for financial, consumer, and digital services.

2. Why are Trent shares rising today?

Trent Limited's shares surged by approximately 10% in early trade today after the company announced a projected 23% year-on-year increase in its standalone revenue for the second quarter of FY27, indicating strong business performance.

3. What is SEBI's potential change to the CAS framework?

SEBI is reportedly considering a temporary halt, for at least a year, in using the Closing Auction Session (CAS) framework for determining derivatives settlement prices. This could mean reverting to the Volume Weighted Average Price (VWAP) of the last 30 minutes of trading for derivatives.

4. How are Indian banks performing in Q2 FY27?

Major private banks like Axis Bank and Kotak Mahindra Bank have reported strong Q2 FY27 business updates, showing significant year-on-year growth in both advances and deposits, suggesting a healthy financial sector.

5. What are the key macro concerns for Indian investors today?

Key macro concerns include elevated Brent crude oil prices, which are hovering above $100 per barrel, and a weakening Indian Rupee against the US Dollar, both of which can impact India's import bill and inflation outlook.

6. When is the next RBI policy decision expected?

The Reserve Bank of India's Monetary Policy Committee (MPC) is scheduled to announce its next policy decision on October 7, 2026. Market expectations are largely for a 25 basis points rate hike.

Disclaimer: This article is for educational purposes only. It does not constitute investment advice. Please consult a SEBI-registered financial advisor before making investment decisions.