India VIX Rises 4.49% as Oil and Geopolitical Risks Hit Markets

Mumbai, Sept 7: India VIX closed higher on Monday as renewed US-Iran tensions around the Strait of Hormuz, rising crude prices and weakness across Indian equities increased near-term market risk. The volatility index ended at 11.16, up 0.48 points or 4.49%, from the previous close of 10.68. It moved between an intraday low of 10.27 and a high of 11.34, signalling a measured rise in volatility rather than a sharp spike. 

India VIX Ends at 11.16 as Risk Rises 

India VIX opened at 10.68, unchanged from Friday’s close, before moving higher during the session. The index reached an intraday high of 11.34 and touched a low of 10.27. At the close, it stood at 11.16, marking a 4.49% increase for the day. The index remained well below its 52-week high of 28.90, while its 52-week low stood at 8.72. Its technical rating remained NEUTRAL, with the Classic pivot point at 10.86, resistance at 11.15, 11.63 and 11.92, and support at 10.38, 10.09 and 9.61. 

Hormuz Escalation Pushes Oil and Volatility Higher 

Fresh military developments involving the United States and Iran became the strongest global trigger during Monday’s session. Reports indicated that US forces struck three Iranian oil tankers, while Iran’s Islamic Revolutionary Guard Corps launched ballistic missiles at two US Navy ships. Tehran also indicated that it would announce a restricted zone outside the Strait of Hormuz. The developments raised concerns over shipping through a major global oil transit route and added pressure to markets already monitoring geopolitical risks. 

The developments pushed Brent crude towards $97.60 a barrel, around 1.5% higher and its highest level in seven weeks. Another market report placed Brent at around $97.40, more than 1% higher on the day. The increase in crude prices added concerns around India’s import costs, current account, currency, inflation, corporate margins, monetary policy, consumption and growth. 

Nifty Falls 0.50% as Broad Selling Supports VIX 

Indian equities also weakened during the session, adding to the rise in India VIX. The Nifty 50 closed at 23,779.15, down 118.55 points or 0.50%, while the Sensex ended at 76,132.81, lower by 382.62 points or 0.50%. Market breadth remained negative, with 1,931 advances against 2,353 declines on the NSE. 

The broader decline increased the demand for downside protection through Nifty options, which directly feeds into India VIX. The index therefore remained above Friday’s close even though the final decline in the benchmark indices was moderate. 

IT Stocks Fall 2.32% Amid Rate Concerns 

Indian information technology stocks added to the pressure on the broader market. The Nifty IT index fell 2.32%, while Nifty Media declined 3.01%, Nifty Metal dropped 1.32%, Nifty PSU Bank fell 1.17%, and Nifty Realty declined 1.35%. Pharma and healthcare were among the sectors that remained positive. 

Among major IT and financial stocks, Infosys declined 3.76%, while SBI Life and HDFC Life each fell 2.42%. Jio Financial declined 2.13%, and Tech Mahindra dropped 2.06%. The IT weakness followed continued market adjustment to higher US rate-hike expectations after stronger US jobs data released before Monday. 

Rupee Holds Near ₹94.44 with RBI Support 

The rupee remained comparatively stable despite the rise in crude prices. The currency traded around ₹94.44 per US dollar, against Friday’s close of ₹94.485. State-run banks sold dollars shortly before the spot market opened, apparently on behalf of the Reserve Bank of India (RBI), with intervention continuing during the session. 

The currency stability provided a counterweight to the higher oil and geopolitical risks. A sharper rupee decline alongside higher crude could have added to concerns around imported inflation and domestic financial conditions, but Monday’s currency movement remained relatively contained. 

RBI Absorbs Over ₹6 Trillion from Banking System 

The RBI also conducted major liquidity-absorption operations on Monday, taking more than ₹6 trillion out of the banking system. The central bank absorbed ₹2.59 trillion through a 30-day operation and ₹3.53 trillion through an overnight operation. It had targeted ₹7 trillion through the 30-day operation, while surplus banking-system liquidity had reached a record ₹11.6 trillion. 

The liquidity operation added a domestic financial-market variable to the day’s risk backdrop. At the same time, active liquidity management and currency intervention provided stabilising elements during a session marked by higher crude prices and geopolitical uncertainty. 

Bond Yield Nears 6.97% Amid Oil and Rate Pressure 

India’s benchmark 10-year government bond yield moved towards 6.97% as markets assessed the combined effect of higher crude prices, global rate expectations and RBI liquidity operations. The stronger US jobs data released earlier had increased expectations of a possible September Federal Reserve rate hike, with markets previously pricing around a 58% probability of such a move. 

The continued adjustment to those expectations also weighed on Indian IT stocks. The upcoming US inflation data added another event for markets to monitor, although no US inflation figures were released on Monday. 

Europe Slips 0.3% while US Markets Remain Shut 

European equities traded around 0.3% lower as markets responded to higher oil prices, Middle East tensions, inflation concerns and political uncertainty. Political developments in Germany, including the AfD emerging as the strongest party in state elections in Saxony-Anhalt, also added to the broader European risk backdrop. French political developments and Marine Le Pen’s prospects ahead of France’s 2027 presidential election remained another area of attention. 

However, US cash markets were closed for the Labor Day holiday. S&P 500 futures were slightly lower, while Nasdaq futures were slightly higher. The absence of a live US equity session limited the immediate global volatility transmission during India’s trading hours. 

September History Shows Mixed VIX Performance 

India VIX’s historical September pattern also remained mixed. The index has recorded negative returns in 10 of 18 years during September. Historical data shows a maximum positive monthly change of 34.92% in 2018, an average positive change of 19.02%, a maximum negative change of -26.10% in 2009, and an average negative change of -8.99%. The overall average September change stands at 3.46%. 

The session also marked the implementation of the NSE’s revised pre-open auction framework from 7 September, aligning the pre-open process more closely with the closing-auction framework to improve price discovery. The change was a market-structure development rather than a direct driver of Monday’s VIX movement. 

India VIX Gains 4.49% But Avoids Sharp Volatility Spike 

India VIX’s move from 10.68 to 11.16 reflected a controlled repricing of near-term risk. The index briefly reached around 11.35 during the session before easing from its intraday high. The combination of US-Iran escalation, Brent crude near $97.6, Indian equity weakness, IT losses, higher global rate expectations and domestic liquidity operations kept volatility elevated. However, stable currency conditions, stronger Asian markets and the closure of US cash markets limited the scale of the move. 

India VIX closed at 11.16, up 4.49%, after geopolitical escalation around the Strait of Hormuz pushed Brent crude towards $97.60 and Indian benchmark indices fell 0.50%. RBI currency intervention and liquidity absorption provided stabilising factors, while the US market holiday limited wider global volatility transmission during Monday’s session. 

Source 

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