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Stocks turned in dramatic gains of nearly 2% in a late surge on Wednesday, capping a turbulent day that saw trading on the National Stock Exchange (NSE), India’s largest, disrupted for nearly four hours because of a technical glitch.

The outage, the longest such in the country, prompted NSE and its main rival BSE to extend trading hours until 5pm on Wednesday to allow investors to close their positions ahead of Thursday’s expiry of monthly derivatives contracts. Many investors couldn’t as brokerages squared off open positions to mitigate risks.

NSE accounts for 80% of India’s trading volume in derivatives.

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The first signs of a problem were noticed about an hour into trading at 10.06am as traders complained that NSE’s benchmark Nifty index, as well as the Nifty Bank Index, had stopped updating.

After about an hour of confusion, at 11.40am, the exchange halted trading in all segments, including derivatives and cash, citing ‘issues’ with the telecom links of its two service providers, which it claimed caused the system to stop updating prices.

As trading resumed at 3.45pm, in a special session, stocks surged, confounding investors with the sheer velocity of the rally. Analysts said the rally was prompted by investors and brokerages trying to square off trades. BSE continued normal trading in all segments through the extended trading day.

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After trading came to a halt on NSE, the exchange notified traders that it received communication from its telecom service providers that there are issues with their links. “We are working on restoring the systems as soon as possible. In view of the above, all segments have been closed at 11.40am and will be restored as soon as the issue is resolved," an NSE spokesperson said in a statement in the afternoon.

Brokers, however, were puzzled as to why trading could not be switched over to NSE’s backup site in Chennai and the unusual time taken by the exchange to communicate to investors. The backup site is a replica of the primary site and is aimed at ensuring trading activity does not stop even if there is a technical glitch.

The Securities and Exchange Board of India (Sebi) has advised NSE to carry out a detailed analysis of the circumstances that caused the snag.

Market participants and brokerages said NSE could have handled the situation better.

Traders said those with open positions in the derivatives segment were on tenterhooks till NSE communicated about a resolution plan at 3.30pm. Many customers who trade in the futures and options (F&O) segment on NSE could not exit, and brokerages squared off positions by 4pm.

“While the extended trading session helped many F&O customers exit their positions, it created confusion among customers whose positions had been squared off," said Zerodha, an online brokerage with the highest number of retail clients. If NSE had informed brokers of a potential reopening or extension of trading hours, at least by 3pm, brokers would not have had to take risk-mitigation measures and square off positions on BSE, Zerodha said.

“Unfortunately, because there were no updates, we had no other choice. The last-minute notification of the trading extension at 3:17pm came a little too late," Zerodha said.

Bharti Airtel, one of the telecom service providers to NSE, has received no communication from NSE, said a person aware of the matter. “Airtel is awaiting NSE’s RCA (root cause analysis) of the technical snag. Based on RCA, the company will move forward and respond accordingly," said a person aware of the matter.

The BSE Sensex rose 1,030.28 points, or 2.07%, to 50,781.69. The 50-share index Nifty gained 1.86% to 14,982.

“Volumes on NSE were expectedly lower than the recent average. However, volumes on BSE at 40,700 crore were the highest since March 2017, due to diversion of trades," said Deepak Jasani, retail research head, HDFC Securities.

“We have taken the matter seriously and have sought a report from Sebi at the earliest," a finance ministry official said under condition of anonymity.

Asit Ranjan Mishra and Ishita Guha in Delhi contributed to the story.

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