Mumbai, Sept. 18 -- Indian mutual funds are increasing their participation in the stock market's new closing auction - but mostly in trades too small to matter, several fund managers told Mint, wary of the sharp price swings that can occur within the 15-minute window.

Introduced on 3 August, the Closing Auction Session (CAS) has struggled to attract sustained participation despite a gradual increase in trading activity. Mutual funds are limiting the trades they route through the auction, preferring transactions where an adverse execution price would have a limited impact on a scheme's net asset value (NAV).

The concern for mutual funds isn't whether the closing auction attracts enough activity - it's whether it can deliver a predictable...