India VIX Falls 4.18% to 12.13 as Crude Cools and US-Iran Tensions Ease

Mumbai, Sept 25: India VIX closed at 12.13 on Friday, down 0.53 points or 4.18%, after opening at 12.68 against the previous close of 12.69. The volatility index moved between 11.77 and 12.83 during the session, as easing crude oil prices and indications of possible US-Iran de-escalation offset elevated US Treasury yields and continued geopolitical uncertainty. 

India VIX Drops 4.18% as Friday Reverses Thursday’s Volatility Spike 

Friday’s decline came a day after India VIX had surged 22.6% to 12.69, reflecting a sharp increase in expected near-term market volatility. On 25 September, volatility moderated as Indian equities stabilised following Thursday’s sell-off. 

The Nifty opened at around 23,035, compared with Thursday’s close of 23,063.10, while the Sensex opened near 73,526. The initial weakness did not develop into another broad market decline. By around 9:40 am, the Sensex was up 172.89 points or 0.23%, while the Nifty had gained 49.95 points or 0.22%. 

India VIX measures the market’s expected volatility over the next 30 calendar days, based on Nifty options’ bid-ask prices. Its decline therefore reflected a moderation in near-term volatility expectations during Friday’s session. 

Crude Oil Eases from Thursday’s Surge, Reducing Volatility Pressure 

Crude oil remained one of the key factors influencing India VIX on Friday. Brent crude was around $105-$106 a barrel, but prices eased from Thursday’s sharp increase. Brent was reported down 0.82% at $105.73, while West Texas Intermediate crude fell around 1.65% to $93.05. 

The moderation followed developments around a possible phased arrangement between the US and Iran involving the reopening of the Strait of Hormuz, a major route for global oil flows. The possibility of reduced disruption provided some relief after oil had contributed to Thursday’s market volatility. 

Lower crude prices reduced immediate concerns around India’s import bill, inflation, the rupee and corporate costs. However, Brent remaining above $105 a barrel meant that oil-related pressure was still present during Friday’s trading session. 

US-Iran Uncertainty Remains, But Hormuz Hopes Ease Risk 

Geopolitical developments continued to influence market conditions, with uncertainty surrounding the US-Iran conflict and the Strait of Hormuz remaining an important backdrop. 

Friday’s news flow was less negative than the previous session, as reports indicated that discussions around a phased arrangement and reopening of the Strait were being explored. This created a counterweight to the geopolitical risks that had contributed to Thursday’s volatility. 

The possibility of de-escalation helped prevent another broad volatility shock, while the absence of a definitive resolution meant that geopolitical uncertainty remained part of the market environment. 

US 10-Year Yield Above 5.1% Keeps Volatility Risks Elevated 

The moderation in India VIX was limited by continued pressure in the US Treasury market. The US 10-year Treasury yield moved above 5.1%, reaching levels not seen since around 2007, while the 30-year Treasury yield was around 5.50%. 

Higher US yields can influence global borrowing costs, currency markets and cross-border capital flows. Friday’s market reports also pointed to expectations of additional US Federal Reserve tightening, with the probability of another rate hike placed at around 70% according to CME FedWatch data. 

The elevated yield environment therefore remained a counterweight to the relief provided by softer crude prices and stabilising Indian equities. 

Rupee Opens at ₹95.90 as Oil Cools Pressure 

The Indian rupee opened at approximately ₹95.90 per US dollar on Friday, around six paise stronger than Thursday’s close of ₹95.99. 

The improvement followed the overnight moderation in crude prices and expectations that intervention by the Reserve Bank of India could help contain pressure around the ₹96 level. 

A steadier rupee, alongside lower crude prices, reduced some of the immediate pressure on India’s import costs. The currency movement was therefore another stabilising factor during Friday’s session, although it was smaller than the impact from oil and global bond yields. 

₹5,027 Crore FII Selling Remains a Market Overhang 

Foreign institutional selling from Thursday remained an important part of the market backdrop. Foreign investors sold approximately ₹5,027.36 crore of Indian equities, while domestic institutional investors bought around ₹4,301.18 crore. 

The flow data highlighted the sharp change in positioning following Thursday’s market decline. On Friday, however, domestic buying and value buying in equities helped prevent another broad-based fall in the headline indices. 

This stabilisation in equity prices was accompanied by a decline in India VIX, although the previous session’s heavy foreign selling remained relevant to the broader volatility environment. 

Weak Market Breadth Limits The Extent Of Friday’s Recovery 

The recovery in headline indices was not reflected uniformly across the broader market. Around 12:25 pm, the Sensex was up 0.17% and the Nifty had gained 0.05%, while the BSE MidCap index fell 0.51% and the BSE SmallCap index declined 0.32%. 

At that point, 2,256 shares were declining, compared with 1,826 advancing shares. The figures showed that the stabilisation in the headline indices occurred alongside continued weakness across parts of the broader market. 

This mixed market performance kept volatility conditions different from a broad-based risk-on session, even as India VIX moved lower. 

Nifty Options Positioning Supports Volatility Moderation 

Nifty options positioning also provided context for the movement in India VIX. Around 12:25 pm, the 23,100 call strike had the highest Nifty call open interest at 1.88 crore contracts, while the 23,000 put strike had the highest put open interest at 2.08 crore contracts. 

With the Nifty trading around the 23,050-23,100 region, the index remained close to these significant options positions. As the underlying index stabilised instead of extending Thursday’s decline, option pricing also reflected the calmer trading conditions during Friday’s session. 

Global Markets Stay Mixed as Indian Volatility Cools 

Overnight global equity cues were mixed rather than uniformly negative. The previous US session saw the S&P 500 decline around 0.02%, the Nasdaq gain 0.01%, and the Dow Jones fall 0.31%. 

Asian markets were similarly mixed, with the Nikkei and Topix higher and Australia’s ASX 200 lower. China and South Korea remained closed for holidays. 

Meanwhile, the Securities and Exchange Board of India (SEBI) broadened foreign portfolio investors’ access to non-agricultural commodity derivatives, including certain physically settled contracts, covering commodity index derivatives and non-cash-settled contracts linked to gold, silver and base metals. The development was primarily structural rather than a major driver of Friday’s VIX movement. 

India VIX Holds Above 12 As September Volatility Stays Uneven 

India VIX’s September seasonality also shows a mixed historical pattern. It has recorded positive returns in 9 out of 18 years, with the highest positive September change at 34.92% in 2018, while the maximum negative change was -26.10% in 2009. The average September change stands at 3.95%. 

Friday’s 12.13 closing level therefore came after a sharp rise on Thursday but did not mark a complete return to the lower volatility levels seen earlier in the month. The session instead reflected easing volatility alongside continued oil, geopolitical and global yield-related risks. 

India VIX closed at 12.13, down 4.18%, as softer crude, a steadier rupee and US-Iran de-escalation expectations offset elevated US Treasury yields, geopolitical uncertainty and the previous session’s ₹5,027.36 crore foreign selling. Friday’s session marked moderation in volatility after Thursday’s sharp increase, while broader market conditions remained mixed. 

Source 

• https://www.nseindia.com/reports-indices-historical-vix