India VIX Falls 5.82% as Equities Recover and Fed Risks Ease

Mumbai, Sept 4: India VIX closed at 10.79, down 0.66 points or 5.82%, on Friday as a recovery in Indian equities, softer US rate-hike expectations and supportive global market cues outweighed elevated crude oil prices, renewed US-Iran tensions and uncertainty ahead of US employment data. The volatility index opened at 11.33, against the previous close of 11.34, and moved within a day range of 10.56–11.33. 

India VIX Falls 5.82% as Markets Rebound 

India VIX declined sharply during the session after Indian benchmark indices recovered from four consecutive sessions of losses. The Nifty 50 moved back above the 23,900 level and approached the 24,000 mark, while the Sensex advanced more than 450 points during the session. 

By early afternoon, the Nifty 50 was at 23,951.05, up 0.33%, while the Sensex stood at 76,677.12, higher by 0.69%. Bank Nifty also gained 0.36% to 57,585.50. The simultaneous rise in the benchmark indices and decline in India VIX marked a reversal from the previous session’s weaker market conditions. 

Thursday had ended with the Sensex at 76,152.86, down 417.49 points or 0.55%, while the Nifty closed at 23,873.45, lower by 41 points or 0.17%. The Friday recovery reduced the immediate downside pressure visible during the preceding sessions. 

Fed Rate-Hike Odds Fall and Support Indian Markets 

A key global development behind Friday’s calmer volatility conditions was the change in expectations around US Federal Reserve policy. Federal Reserve Governor Christopher Waller said he would support keeping interest rates unchanged at the Fed’s next meeting if incoming data confirmed that inflationary pressures were easing. 

Following the comments, the probability of a September rate hike fell to around 50% from 63% previously. The shift reduced immediate uncertainty around US monetary policy and was accompanied by lower bond yields and firmer global equities. 

The softer rate outlook provided a supportive overnight backdrop for Indian markets and contributed to the decline in India VIX during the Indian trading session. 

Wall Street Gains and Asian Markets Add Support 

US equities posted strong gains on Thursday after markets reassessed the possibility of a September rate increase. The S&P 500 rose 1.06%, the Nasdaq gained 1.40%, and the Dow Jones advanced 1.18%. 

Asian markets broadly followed the positive lead on Friday. The MSCI Asia-Pacific equities gauge gained 0.3%, while Hang Seng futures rose 1.1% and Australia’s ASX 200 advanced 0.1%. Japan’s Topix, however, declined 0.2%. 

The improved international market backdrop provided support to Indian equities during the session. IT stocks also participated in the recovery after weakness in the previous session, helped by improved conditions in US markets. 

SEBI Review Eases Derivatives Settlement Concerns 

Another domestic development influencing market conditions was the response to the Securities and Exchange Board of India’s (SEBI) review of the settlement-price methodology for derivatives following the introduction of the Closing Auction Session. 

Although the announcement was made on 3 September, its effect continued into Friday’s trading session. Capital-market stocks advanced, with the Nifty Capital Markets index rising 1.09%. Angel One gained 5.66%, BSE advanced 3.41%, MCX rose 1.93%, Groww increased 1.63%, and Motilal Oswal Financial Services gained 1.54%. 

The review addressed concerns relating to expiry-day pricing, derivatives settlement, index closing levels and options pricing, providing a significant regulatory development for the derivatives segment during Friday’s session. 

Stronger Rupee Adds to the Calmer Market Backdrop 

The Indian rupee also provided a stabilising element during the session. The stronger currency accompanied the recovery in domestic equities and the improved global rate outlook. 

Currency stability was relevant to the broader market backdrop because it reduced pressure associated with imported inflation, foreign-investor returns, external conditions and higher oil-import costs. Alongside firmer equities, the rupee contributed to the more stable conditions recorded during the trading session. 

Crude Near $96 Keeps Volatility Risks Elevated 

Despite the decline in India VIX, crude oil remained a significant source of pressure. Brent crude was reported at around $96 a barrel, with prices continuing to rise amid renewed US-Iran tensions and concerns over Middle East supply. 

Higher crude prices remain relevant for India because they affect inflation, the current account, the rupee, corporate margins, transportation costs and monetary-policy flexibility. Consequently, the decline in India VIX occurred even as an important external risk remained elevated. 

US Jobs Data Limits the Fall in Volatility 

Markets were also positioned ahead of the US employment report, which remained an important global event during Friday’s session. Employment data can influence expectations around Federal Reserve policy, US Treasury yields, the dollar and global equity valuations. 

However, the pending data did not trigger a major reversal in India VIX during Indian market hours. The uncertainty instead remained a counterweight to the otherwise supportive global rate and equity backdrop. 

FII Selling Meets Strong DII Buying Support 

Institutional flows also formed part of the market backdrop entering Friday. On Thursday, foreign institutional investors sold approximately ₹2,345.87 crore, while domestic institutional investors bought around ₹4,977.46 crore. 

The contrasting flows provided a mixed institutional picture, with domestic purchases providing a counterweight to foreign selling. This backdrop accompanied Friday’s broader recovery in Indian equities and the corresponding decline in India VIX. 

India VIX Ends Near 10.79 After Intraday Low 

India VIX finished the session at 10.79, compared with its previous close of 11.34, after touching a low of 10.56 and a high of 11.33. Its 52-week range remains 8.72–28.90, while the technical rating is NEUTRAL. 

The classic pivot levels for Friday were R1 11.70, R2 12.07, R3 12.54, PP 11.23, S1 10.86, S2 10.39 and S3 10.02. Seasonality data shows that India VIX has delivered negative returns in 10 of 18 years during September, while the month’s average change is 3.29%. 

Multiple Risks Still Shape India VIX 

Friday’s decline reflected a combination of stronger Indian equities, lower US rate-hike expectations, positive Wall Street and Asian-market cues, lower global bond yields, the SEBI derivatives-settlement review and a firmer rupee. These factors outweighed elevated crude prices, renewed US-Iran tensions, US employment-data uncertainty and the previous day’s foreign institutional selling. 

The closing move therefore came against a mixed risk backdrop, with supportive domestic and global developments dominating the session while oil, geopolitical developments and US economic data remained relevant external factors. 

India VIX closed at 10.79, down 5.82%, as stronger domestic equities and softer US rate expectations outweighed crude oil and geopolitical risks. The session also featured gains across capital-market stocks following the SEBI review, while US jobs data remained a key global event. The index’s 52-week range is 8.72–28.90. 

Source 

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