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The spikes are now occurring as frequently as four to five times a month, compared to perhaps once a year previously, posing significant challenges for traders.
Potential reasons attributed to these spikes include the involvement of high-frequency trading firms using algorithmic trading strategies, occurrences of fat-finger errors, and the regular expirations of lesser-liquid indexes like FinNifty and MidcapNifty, which are susceptible to manipulation through movements in underlying stocks.
Newer indices like Midcap have lower liquidity, meaning even moderate selling pressure may not be readily absorbed causing abrupt spikes, said market experts.
With the number of traders and contracts going up, there is a rise in shocking price movements.
Exchanges will remain closed on Monday as there will be a stock market holiday for both equity and derivative markets on the occasion of the inauguration of Ram Mandir.