India VIX Rises 1.41% as Global Yields, FII Selling Lift Early-Session Volatility

Mumbai, Oct 1: India VIX rose 0.19 points, or 1.41%, to 13.68 by 09:53 IST on Thursday, after opening at 13.49, unchanged from the previous close. The volatility index touched an early-session high of 13.93, while its low stood at 13.49. The move came as the Nifty 50 opened lower, foreign institutional selling remained elevated, US Treasury yields stayed high and crude oil traded close to the $100-per-barrel mark. 

India VIX Opens at 13.49 as Nifty Starts 0.18% Lower 

India VIX opened at 13.49, matching its previous close, before moving higher during the early session. The index’s day range stood at 13.49-13.93 as of 09:53 IST. Its 52-week range was 8.72-28.90, while the index had gained 44.73% year-to-date. The early movement indicated a measured increase in expected market volatility rather than a sharp opening jump. 

The Nifty 50 opened at 22,580.15, down 40.30 points, or 0.18%, while the Sensex declined about 120 points at the opening. The Nifty was therefore trading below the previous session’s close of 22,620.45, keeping the 22,550-22,500 zone in focus during the early session. 

India VIX is derived from Nifty option prices and reflects expected volatility over the near term. Consequently, movements in the benchmark index, option positioning and wider domestic and global risk factors can influence its level. 

FII Selling of ₹10,148 Crore Adds to Volatility Pressure 

Foreign institutional investors sold ₹10,148.41 crore of Indian equities on 30 September, marking their largest single-day outflow in nearly six months. Domestic institutional investors, meanwhile, bought ₹11,271.73 crore of equities. 

The latest foreign selling took cumulative September FII outflows to approximately ₹44,013 crore, with foreign investors emerging as net sellers in 16 of 21 trading sessions during the month. At the same time, domestic institutions remained net buyers through September. 

The heavy foreign outflow entered the October trading series alongside a significant derivatives position. Foreign investors’ Nifty index-futures shorts had risen to approximately 267,000 contracts, compared with around 184,000 contracts at the previous expiry. 

The September derivatives series had also ended with the Nifty down 6.7% and Bank Nifty down 5.7%. Nifty futures open interest increased by nearly 30% from the beginning of September, while Nifty and Bank Nifty rollover levels stood at approximately 74% and 79%, respectively. 

US 10-Year Yield at 5.29% Keeps Global Volatility Elevated 

Global bond-market conditions remained an important factor for the Indian market at the start of October. The US 10-year Treasury yield was around 5.29-5.30%, remaining close to its highest level since 2007, while the 30-year US Treasury yield was around 5.6%. 

Higher US Treasury yields were accompanied by a stronger US dollar and continued pressure on emerging-market assets. The Dollar Index was around 101.48-101.58, keeping currency conditions relevant for the Indian market. 

The previous US session was mixed. The Dow Jones Industrial Average fell 0.86%, the S&P 500 declined 0.25%, while the Nasdaq Composite gained 0.24%. US equity futures subsequently traded higher during Thursday morning as oil prices eased from earlier levels. 

Rupee Near ₹95.95 and Oil Around $98 Shape Risk Conditions 

The Indian rupee opened at approximately ₹95.95 per US dollar, compared with Wednesday’s close of ₹95.82. The currency remained under pressure amid the stronger dollar, elevated US Treasury yields and high crude prices. 

Brent crude was trading around $98.15-$98.30 per barrel, while West Texas Intermediate was around $90.35-$90.46. Brent remaining below $100 provided some relief after the rise in energy prices during September, although crude remained elevated for an oil-importing economy such as India. 

Oil prices were also influenced by developments surrounding US-Iran negotiations and the outlook for Middle East crude exports. Reports that Tehran had received Washington’s response to its latest ceasefire proposal contributed to the decline in Brent towards $98. 

The oil market therefore provided mixed signals for India VIX, with prices below $100 reducing some immediate pressure while continued uncertainty over Middle East supply flows kept a geopolitical risk element in the market. 

Asian Markets Mixed as GIFT Nifty Signals Weak Start 

Overseas equity markets provided no uniform direction before the Indian opening. Japan’s Nikkei 225 gained approximately 0.9%, while South Korea’s Kospi declined around 0.8% and Australia’s S&P/ASX 200 fell about 0.8%. China and Hong Kong markets remained closed for holidays. 

GIFT Nifty indicated a weaker opening for Indian equities, trading around 22,570-22,632 in the morning before the cash-market session began. The signal came against the backdrop of elevated US Treasury yields, persistent foreign selling and mixed Asian markets. 

At the same time, softer US inflation data reduced expectations of another Federal Reserve rate hike in October. This provided a counterweight to the pressure created by high bond yields and the stronger dollar. 

October Policy Changes Add Domestic Market Context 

Two domestic policy developments also took effect from 1 October. The government reduced windfall taxes on exports of diesel and aviation turbine fuel, a measure relevant particularly to the oil and refining sector. 

New Foreign Exchange Management Act (FEMA) export and import regulations also came into effect, including a standard nine-month period for realisation of export proceeds. These developments formed part of the wider domestic market backdrop but were not identified as primary drivers of the early India VIX movement. 

India VIX Trades Above 13.90 After Flat Opening 

The early-session movement in India VIX showed a clear change from its opening level. The index began at 13.49, matching the previous close, and subsequently reached 13.93. At 09:53 IST, it stood at 13.68, representing a gain of 0.19 points, or 1.41%. 

The movement occurred alongside a lower Nifty opening and a combination of foreign outflows, elevated US yields, currency pressure and continued uncertainty around crude oil and Middle East developments. At the same time, Brent remaining below $100, softer US inflation and domestic institutional buying provided offsetting factors. 

The October seasonality data showed that India VIX has recorded negative returns in 9 of 17 years during October. Its historical average change for the month was -1.61%, with the maximum positive change at 26.73% in 2020 and the maximum negative change at -30.99% in 2013. 

India VIX began October at 13.49 and rose to 13.68 by 09:53 IST, with an early high of 13.93. The opening-session movement followed a lower Nifty start, heavy FII selling, elevated US yields, rupee pressure and continued crude-related uncertainty, partly offset by Brent below $100 and softer US inflation data. 

Source 

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