India VIX Rises 1.73% as RBI Policy Meeting and Global Risks Lift Volatility

Mumbai, Oct 5: India VIX closed at 14.71 on Monday, rising 0.25 points or 1.73% from the previous close of 14.46. The index opened at 14.45 and moved between an intraday low of 13.49 and a high of 15.35 before ending the session higher. The rise came despite a recovery in Indian equities, as uncertainty around the Reserve Bank of India’s Monetary Policy Committee meeting, the rupee near ₹96 per US dollar, crude oil above $100 a barrel and wider global risks kept volatility elevated. 

India VIX Climbs from 13.49 to 15.35 During Monday’s Session 

India VIX initially moved lower after the Indian market opened on positive global cues. The index touched an intraday low of 13.49 as equities advanced, with the Nifty and Sensex gaining during the opening part of the session. Around 9:50 am, India VIX was near 14.33, down 0.69%, while the broader equity market was higher. 

Volatility subsequently returned during the trading day. India VIX rose to a high of 15.35 before closing at 14.71. The previous close was 14.46, while the index had a 52-week low of 8.72 and a 52-week high of 28.90. Its year-to-date return stood at 54.96%. 

The session therefore saw a reversal from the early decline in volatility, with the index finishing higher even as the broader market maintained its recovery. 

RBI Meeting Starts as Rate Decision Remains Ahead 

The Reserve Bank of India’s Monetary Policy Committee meeting began on 5 October and will continue until 7 October, with the policy decision scheduled for Wednesday. The meeting became the key domestic event during Monday’s session as market expectations centred on the possibility of a 25-basis-point rate increase. 

Such an increase would be the first rate hike in nearly four years. Expectations of further tightening over the following year also remained part of the policy backdrop. Attention remained focused on the RBI’s assessment of inflation and economic growth, its guidance on interest rates and its comments on the rupee. 

The rate decision was not announced on Monday, leaving the policy outcome and accompanying guidance as an immediate source of uncertainty during the India VIX session. 

Rupee Near ₹96 and Oil Above $100 Add Volatility Risks 

The rupee remained close to ₹96 per US dollar during Monday’s trading. It opened around ₹96.20 and weakened to approximately ₹96.26. Intervention helped contain the movement, although continued foreign equity outflows and a stronger US dollar remained sources of pressure. 

Crude oil also remained important for Indian markets. Brent crude stayed above $100 a barrel, although prices eased during the session. Brent was around $101.39, down about 0.8%, while US crude fell about 1.4%. 

Additional Middle Eastern supplies and the Group of Seven’s move to release emergency oil stocks helped moderate supply concerns. However, oil remaining above $100 kept the broader inflation and external-balance backdrop relevant to volatility during the session. 

Middle East Tensions Persist Despite Lower Crude Prices 

Geopolitical developments in the Middle East continued to influence global markets on Monday. Saudi-backed forces launched an offensive against Houthi-held areas, while the Houthis claimed missile and drone attacks against Saudi Aramco facilities. 

The developments kept attention on the possibility of further disruption to regional energy supplies. At the same time, increased oil availability and strategic stock releases helped push crude prices lower. 

The opposing effects of continuing geopolitical tensions and improving near-term supply expectations contributed to an uneven global risk backdrop, with implications for oil prices, currencies and market volatility. 

Weaker US Jobs Data Reduces Fed Hike Expectations 

The weaker US employment data released before Monday’s Indian session continued to influence market conditions. The data reduced expectations of another US Federal Reserve rate increase in October, with the probability reportedly falling to around 18% from 64% a week earlier. 

Lower expectations of an immediate US rate increase supported Asian equities during Monday’s session. Japan’s Nikkei gained about 2.4%, while the broader Asia-Pacific index excluding Japan rose around 1.2%. Taiwan also recorded a strong performance. 

These global equity gains provided a positive opening cue for Indian markets and contributed to the initial fall in India VIX. 

US Bond Yields and France Add Global Market Caution 

The decline in expectations for an October US rate increase did not remove pressure from global bond markets. The US 10-year Treasury yield remained close to a multi-decade high, keeping broader financial conditions a source of caution during Monday’s session. 

European markets also faced pressure as concerns about France’s fiscal and political situation intensified. The euro fell to around a 17-month low, France’s CAC 40 declined about 0.9% and the French 10-year bond yield rose to roughly 4.92%. The France-Germany 10-year yield spread moved above 150 basis points. 

These developments added to the global backdrop of elevated bond and currency market uncertainty. 

Banks and IT Stocks Support Equity Recovery on Monday 

Financial stocks contributed to the recovery in the Indian equity market. HDFC Bank gained around 1% after Anup Bagchi was named chief executive officer. Punjab National Bank rose about 2.8% after reporting 14.8% growth in global advances, while Bank of Baroda gained around 2.5% after reporting 18% growth in quarterly advances. 

Bajaj Finance rose about 4.3% following 11% year-on-year growth in new loans. The financial sector therefore provided a strong positive influence on the broader market. 

Information technology stocks also benefited from the latest global business update from Accenture. India’s IT index gained around 1.1%, although some stocks later surrendered part of their early gains. 

Foreign Outflows Keep the Rupee and Volatility in Focus 

Foreign selling remained part of the market backdrop entering Monday’s session. Data available from 1 October showed foreign institutional investors had sold ₹9,484.22 crore, while domestic institutional investors bought ₹10,041.84 crore. The foreign selling figure was from 1 October and was not a new 5 October transaction. 

The continuing foreign-flow theme remained relevant alongside the rupee’s movement near ₹96 per dollar. The combination kept currency and equity-market volatility in focus during the trading session. 

India VIX Reverses Despite Nifty Recovery During the Day 

The day produced a divergence between equity performance and volatility. Early gains in the Nifty and Sensex coincided with a decline in India VIX towards 13.49. Later, however, the volatility index reversed direction and reached 15.35 before closing at 14.71. 

The movement occurred as domestic policy uncertainty coincided with currency pressure, elevated oil prices and continuing global risks. The session therefore combined a recovery in equities with a rise in implied volatility by the close. 

The index’s technical rating remained Neutral. The classic pivot levels for the session were 15.60, 16.73 and 17.79 for R1, R2 and R3, with a pivot point of 14.54 and S1, S2 and S3 at 13.41, 12.35 and 11.22. Fibonacci levels were 15.38, 15.90 and 16.73 on the upside, with 13.71, 13.19 and 12.35 on the downside. Camarilla levels stood at 14.66, 14.86 and 15.06 above the pivot and 14.26, 14.06 and 13.86 below it. 

October History Shows Mixed India VIX Performance 

Historical seasonality also presented a mixed picture for October. India VIX has recorded positive returns in October in 9 of 18 years. The maximum positive monthly change was 26.73% in 2020, while the average positive change was 11.64%. 

The maximum negative change for October was 30.99% in 2013, with the average negative change at 13.66%. Overall, the average change for the month stood at -1.01%. 

India VIX ended 5 October at 14.71 after moving between 13.49 and 15.35. The session was influenced by the start of the RBI policy meeting, the rupee near ₹96, crude above $100, global bond-market concerns, Middle East developments and changing US rate expectations, while domestic financial and IT stocks supported the equity market. 

Source 

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