India VIX Holds Near 14.33 as Nifty Opens Higher on Softer Oil and Lower Fed-Hike Fears

Mumbai, Oct 5: Indian markets began Monday on a stronger note, with the Nifty 50 and Sensex gaining in early trade as easing crude oil prices and reduced fears of aggressive US rate hikes offered some relief to investors. 

The improvement in sentiment was also reflected in the India VIX. The volatility index opened at 14.45, compared with its previous close of 14.46, and stood at 14.33 at 09:50 IST, down 0.10 points or 0.69%. During the early session, India VIX moved between 13.49 and 14.78. 

At 09:18 IST, the Nifty 50 was up 0.60% at 22,556.45, while the BSE Sensex gained 0.67% to 72,390.30. 

The positive opening comes after a difficult stretch for Indian equities. The Nifty had fallen for an eighth straight week, losing 3.11% last week, as investors remained cautious amid concerns over global interest rates, crude oil prices and broader market uncertainty. 

India VIX Eases 0.69% as Nifty Gains 0.60% at Open 

India VIX started the week on a relatively calmer note after rising sharply during the previous week. The index had climbed around 18.9% last week and ended the previous session at 14.46. 

Monday’s early decline therefore offered some relief, although volatility remains higher than it was earlier in the year. India VIX is still comfortably above its 52-week low of 8.72, while its 52-week high stands at 28.90. 

The broader market also opened in positive territory. As many as 13 of the 16 major sectoral indices were trading higher in early deals. 

Banking and financial stocks were among the stronger performers. The Nifty Bank index gained 1.1%, while the Nifty Financial Services index rose 1%. The Nifty PSU Bank index performed even better, advancing 2%. 

The broader market also participated in the recovery, with both the Nifty Midcap and Nifty Smallcap indices rising around 0.9%. 

The early fall in India VIX suggests that investors were starting the week with a little more confidence after the sharp sell-off seen last week. However, with volatility still elevated compared with recent lows, traders are likely to remain sensitive to global cues, crude oil movements and expectations around US monetary policy. 

Softer US Jobs Data Cuts October Fed-Hike Expectations 

Global markets entered Monday’s session with reduced expectations of an immediate US Federal Reserve rate increase after September employment data showed a weaker labour market. US non-farm payrolls increased by only 29,000 in September, while the unemployment rate rose to 4.2% from 4.1%. 

The weaker employment reading reduced expectations of an October rate increase. Global markets subsequently began the week on a firmer footing, with the probability of an October US rate hike falling below 20%. Asian equities also opened higher, with Japan’s Nikkei gaining around 2.5% in early trading. 

The change in US rate expectations provided support to Indian equities at the opening and helped prevent a fresh rise in India VIX after its strong increase during the previous week. 

Brent Near $101.52 Eases Pressure on Indian Markets 

Crude oil remained another important factor for the Indian market at Monday’s open. Brent crude was around $101.52 a barrel in early global trading, with increased Middle East exports and releases from G7 stockpiles helping offset some supply concerns. 

The easing in crude prices also supported the rupee. The domestic currency opened at ₹96.22 per US dollar, compared with ₹96.32 previously, gaining 10 paise. Brent had remained a source of pressure for the rupee and Indian markets over the previous two weeks, while global bond yields also remained elevated. 

For the Indian market, the combination of lower crude and a marginally stronger rupee provided relief at the opening, although the rupee continued to remain close to a two-month low. 

Middle East Risks Keep Oil Volatility Elevated 

The improvement in crude prices came despite continuing geopolitical concerns in the Middle East. Early Monday trading remained sensitive to reports of attacks involving Iran-backed Houthis and Saudi oil infrastructure, while concerns over the security of regional oil supplies continued. 

Oil prices initially moved higher on supply concerns before subsequently easing as increased exports and additional stock releases reduced fears of an immediate supply shortage. Brent therefore remained above $100 a barrel, keeping the broader energy-market risk elevated even as Monday’s opening conditions improved. 

Continuing uncertainty surrounding US-Iran relations and the Strait of Hormuz also remained relevant to oil markets. Any disruption to the key shipping route would have implications for global crude supplies and therefore for inflation and currency conditions in major oil-importing economies such as India. 

RBI MPC Meeting Starts with Rate Hike Expectations 

The Reserve Bank of India’s Monetary Policy Committee (MPC) meeting began on Monday, adding a domestic policy event to the market’s list of near-term factors. The policy decision is scheduled for later in the week, with expectations building around a possible 25-basis-point increase in the repo rate to 5.50%. 

The meeting comes against a backdrop of elevated crude prices, pressure on the rupee and higher global bond yields. The possibility of a policy rate increase therefore remained an important factor in the broader volatility backdrop, even though it did not trigger a rise in India VIX during the opening minutes. 

The rupee’s opening at ₹96.22 also kept currency developments closely linked to expectations around the central bank’s policy response. 

FII Selling Keeps Pressure Elevated Despite Opening Gains 

Foreign institutional selling remained an important background factor as Indian equities began Monday’s session. Foreign investors had sold approximately ₹9,484 crore on 1 October, marking their sixth consecutive session of net selling. Their cumulative selling over those six sessions exceeded ₹43,000 crore, while domestic institutional investors bought more than ₹10,000 crore on 1 October. 

The sustained foreign outflows followed an extended period of weakness in Indian equities. The Nifty 50 had declined 3.11% during the previous week to close at 22,421.95, while the Sensex fell 2.69% to 71,909.70. The two indices had consequently recorded their eighth consecutive weekly decline. 

Financial Stocks Lead Recovery With Banking Gains 

Financial stocks provided significant support during Monday’s opening session. The banking sector gained 1.1%, while financial stocks rose 1%, helping the benchmark indices recover after the previous week’s losses. 

HDFC Bank rose around 1% after the lender named Anup Bagchi as its new chief executive officer for a three-year term. Bajaj Finance gained around 3.6% after reporting an 11% year-on-year increase in new loans booked during the September quarter. 

The strength across major financial stocks contributed to the broader opening gains and helped the Nifty maintain its positive start. 

India VIX Trades Below 52-Week High Of 28.90 

At 09:50 IST, India VIX was at 14.33, compared with an opening level of 14.45 and the previous close of 14.46. The index remained substantially below its 52-week high of 28.90, but above its 52-week low of 8.72. 

Its technical pivot level for the day was 14.54, with the classic resistance levels at 15.60, 16.73 and 17.79, while support levels stood at 13.41, 12.35 and 11.22. The daily technical rating was Neutral. 

Seasonality data also showed that India VIX has recorded positive returns in 9 of 18 years during October. The maximum positive monthly change was 26.73% in 2020, while the maximum negative change was 30.99% in 2013. The average October change was -1.16%. 

India VIX opened at 14.45 and stood at 14.33 by 09:50 IST, while the Nifty gained 0.60%. Softer crude, reduced expectations of an October US rate hike and stronger financial stocks supported the opening, while RBI policy uncertainty, foreign selling, elevated yields and geopolitical risks remained key market factors. 

Source 

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