India VIX Rises 4.8% to 12.37 as Crude Nears $110 and Nifty Falls 0.92%

Mumbai, Sept 11: India VIX closed at 12.37 on Friday, up about 4.8% from 11.80 on 10 September, as escalating West Asia tensions, a sharp rise in crude oil prices and weak global markets pressured Indian equities. The volatility index climbed to 12.42 in the opening session before easing as crude prices retreated and Indian benchmarks recovered from their early lows. 

India VIX Climbs 4.8% as Nifty Falls 0.92% 

India VIX opened higher after the previous session’s 11.80 close and rose 0.55 points, or 4.66%, to 12.42 during the opening session. The index traded between 11.02 and 12.56 during the day before ending at 12.37. 

The rise in volatility came as the Nifty opened sharply lower and remained under pressure through the session. The benchmark index closed at 23,261.70, down 0.92%, while the Sensex fell 0.84% to 74,272.61. Both benchmarks moved around three-month lows during the session. 

The broad market decline accompanied the rise in India VIX, with selling extending across several major sectors. The session therefore began with a sharp increase in market volatility before conditions stabilised somewhat later in the day. 

West Asia Escalation Sends Brent Towards $110 

Fresh developments involving Iran-aligned Houthi forces and the Red Sea emerged as the dominant trigger for Friday’s market weakness. Reports that Houthi forces had captured Yemen’s port of Mocha and advanced along important Red Sea routes increased concerns about shipping and energy-supply disruptions. 

The developments pushed Brent crude sharply higher, with the benchmark reaching $109.97 at its intraday extreme. Brent later retreated, but the early surge added pressure to markets already facing concerns over prolonged geopolitical disruption. 

For India, the rise in crude prices came alongside concerns over import costs, inflation and the rupee. The combination contributed to the sharp risk-off opening in domestic equities and the initial increase in India VIX. 

Crude Surge and Rupee Weakness Raise Pressure 

Brent was around $108.31 in the morning after crude had surged almost 6% overnight from roughly $101. The sharp movement in oil prices became a key market development during the session as traders assessed the effect of the geopolitical escalation on energy supplies. 

The rupee also weakened during Friday’s trading session, falling to around ₹95.70–₹95.79 per US dollar. It declined as much as 0.4% to ₹95.7925 before recovering some ground. 

The currency recorded its fourth consecutive daily decline, with the combination of higher crude prices and elevated US Treasury yields adding pressure during the session. State-owned banks were also seen selling dollars, reportedly on behalf of the Reserve Bank of India (RBI). 

RBI Support Helps Limit the Rupee’s Fall 

The RBI was likely intervening in the foreign-exchange market as the rupee weakened alongside rising oil prices. State-owned banks were seen selling dollars, while the RBI was also carrying out dollar-rupee sell/buy swaps for a third consecutive day. 

The intervention came as the currency faced pressure from higher crude prices and elevated US Treasury yields. It helped contain the rupee’s decline during the session, although the currency remained weaker overall. 

The rupee’s movement remained an important domestic market development on Friday because it occurred alongside the sharp rise in crude and the decline in Indian equities. 

US 10-Year Yield Nears 5% as Global Markets Weaken 

US Treasury yields added to the pressure on global markets during the session. The 10-year US Treasury yield reached 4.979%, moving close to the psychologically important 5% level, while the two-year yield reached 4.5961%, its highest level in roughly 14 months. 

Higher US yields coincided with weakness across Asian markets. The Nikkei fell about 1.9%, the Kospi declined 1.8%, the Hang Seng dropped 0.7%, and the Shanghai Composite fell 1.2% during the relevant trading window. 

Wall Street had also ended the previous session lower, while US futures remained subdued during India’s morning session. The weak overseas backdrop contributed to the pressure on domestic benchmarks at Friday’s open. 

Nifty And Sensex Slide as Selling Broadens 

Indian equities opened sharply lower, with the Nifty falling about 234 points, or 1%, to 23,243.70. The Sensex declined about 709 points, or 0.95%, to 74,194.03 at the open. 

The Nifty subsequently touched around 23,231, while the Sensex fell about 742 points during early trading. Selling then spread across the market, with 15 of 16 major sectors declining. 

Financials fell 1.4%, metals dropped 2.8%, and autos declined 1.3%. Small-cap and mid-cap stocks also fell by around 1.2% and 1.4%, respectively. 

The broad-based decline accompanied the early increase in India VIX as the market responded to the combination of geopolitical concerns, higher crude prices and weak global cues. 

India Bond Yield Crosses 7% on Inflation Concerns 

India’s benchmark 10-year government bond yield crossed 7% during Friday’s session, reaching its highest level in more than three months. 

The move came as markets assessed the effect of higher crude prices on inflation and interest rates. The rise in the benchmark yield added another significant development to a session already marked by weakness in equities, the rupee and global markets. 

The bond market movement occurred alongside the sharp increase in crude prices and the rupee’s decline, while US Treasury yields remained close to multi-month highs. 

Oil Retreat And Equity Recovery Moderate Volatility 

Brent crude later pulled back from its intraday high of $109.97, falling almost 2% to around $105.90 after reaching the four-month high. Reports that Gulf ministers planned to engage Iran over temporary access through the Strait of Hormuz also helped ease some pressure on oil prices. 

Indian equities subsequently recovered part of their early losses. The Nifty finished at 23,261.70, down 0.92%, while the Sensex ended at 74,272.61, down 0.84%. 

This recovery coincided with the retreat in crude prices and support for the rupee. India VIX nevertheless remained above its previous close and ended at 12.37, compared with 11.80 on 10 September. 

FII Selling Adds to the Existing Market Pressure 

Foreign institutional selling remained part of the market backdrop entering Friday’s session. On 10 September, foreign institutional investors sold approximately ₹438.24 crore, while domestic institutional investors bought around ₹1,025.85 crore. 

The flow data preceded Friday’s trading session and therefore does not represent a fresh 11 September event. However, it formed part of the existing market conditions as Indian equities entered Friday’s session. 

Domestic institutional purchases provided a counterforce to foreign selling, while the broader market remained sensitive to global and domestic developments. 

US CPI Was Released After India’s Market Close 

The US August Consumer Price Index (CPI) was scheduled for release at 8:30 am US Eastern Time, equivalent to approximately 6:00 pm IST. Therefore, the actual CPI data was not available during India’s 9:15 am to 3:30 pm cash-market session. 

Expectations surrounding the release formed part of the global economic backdrop, but the actual US CPI number did not drive India’s 11 September trading session or its closing India VIX level because the data came after the Indian market closed. 

Friday’s India VIX movement instead coincided with the day’s developments in West Asia, crude oil, the rupee, US Treasury yields, Asian markets and Indian equities. 

IPO Activity Adds A Secondary Liquidity Factor 

India’s primary market remained active on Friday, with several initial public offerings entering their final subscription day and Manika Plastech opening for subscription on 11 September. 

Six mainboard IPOs were also in their final subscription phase, including Rentomojo, Karamtara Engineering, LCC Projects, Steamhouse India, Manipal Payment & Identity Solutions and Asset Reconstruction. 

IPO activity remained a secondary consideration during the session compared with the larger market developments involving geopolitics, crude oil, the rupee, global yields and equity-market weakness. 

India VIX Ends at 12.37 After Early 12.42 Spike 

India VIX’s Friday session captured a sharp rise in volatility at the opening followed by some moderation as the trading day progressed. The index moved from 11.80 on 10 September to an opening-session level of 12.42, before closing at 12.37. 

The day’s range stood at 11.02 to 12.56, while the 52-week range remained 8.72 to 28.90. The technical rating was Neutral. Historical seasonality data showed that India VIX had recorded positive returns in 9 of 18 years during September, with an average September change of 4.02%. 

The day’s market sequence was marked by the West Asia escalation, Brent crude moving towards $110, the rupee weakening towards ₹95.8 per US dollar, the US 10-year yield approaching 5%, Asian market declines and a broad Indian equity sell-off. The subsequent retreat in crude and partial recovery in domestic equities helped limit the day’s final volatility reading. 

India VIX ended at 12.37, up from 11.80, after reaching 12.42 during the opening session. Friday’s volatility coincided with West Asia developments, Brent crude near $110, rupee weakness, elevated US yields and a broad equity decline, while the later oil retreat and market recovery moderated the session’s final volatility level. 

Source 

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