India VIX Rises 6.18% to 11.34 as Oil Tops $90

Mumbai, Aug 31: India VIX rose 0.66 points, or 6.18%, to 11.34 by 10:28 IST on Monday, after opening at 10.68, the same level as the previous close. The volatility index climbed to an early-session high of 11.38, while its day range stood at 10.68–11.38. The move came as Indian equities opened lower amid heightened geopolitical tensions, higher crude prices, weaker Asian markets and renewed expectations of a US Federal Reserve rate hike. 

India VIX Climbs 6.18% After Flat Open 

India VIX did not record a gap-up at the opening bell. It began at 10.68, matching Friday’s previous close, before rising during the first hour of trading. The index touched an early high of 11.38 and was around 11.19 at 10:14 IST, up 4.78%. Another live reading showed it at 11.31, up 5.90%, at 10:04 IST, highlighting the rapid movement during the opening session. 

At 10:28 IST, India VIX stood at 11.34, up 0.66 points, or 6.18%. Its 52-week range is 8.72–28.90. The technical rating remained Neutral, while the classic pivot levels were R1 at 11.04, R2 at 11.39, R3 at 11.65, PP at 10.78, S1 at 10.43, S2 at 10.17 and S3 at 9.82. 

Nifty Falls 0.42% as Fourteen Sectors Decline 

Indian equities weakened alongside the rise in volatility. At 9:22 IST, the Nifty 50 fell 0.42% to 24,073.85, while the Sensex declined 0.28% to 77,042.87. Fourteen of 16 major sectors were lower, with the Nifty IT index down around 1.5%. Mid-cap and small-cap indices were relatively flat during the early session. 

The weaker opening in the benchmark indices coincided with the rise in India VIX from its opening level of 10.68 to above 11.20, making the movement in the volatility index part of the broader early-session market decline. 

US-Iran Escalation Sends Brent Above $90 

The main overnight development affecting Monday’s opening was the fresh escalation between the US and Iran. US forces struck two Iranian missile launchers on Larak Island in the Strait of Hormuz on Sunday, 30 August, while Iran subsequently attacked US forces stationed in Jordan. The developments increased concerns over the security of the Strait of Hormuz and potential disruption to global oil supplies. 

Brent crude rose towards $90.60 a barrel, while US crude moved to around $85.50. Another early reading put Brent at $89.18, up 1.23%, before the subsequent move towards $90. The rise in oil prices formed a key part of the overnight backdrop for Indian markets. 

Asian Markets Fall as Oil and Rates Rise 

The risk-off tone was also visible across Asian markets before the Indian session. The Nikkei fell about 1.6%, South Korea declined around 2.2%, and the MSCI Asia-Pacific ex-Japan index dropped about 1.2%. Chinese blue chips declined around 0.7%, while European futures were lower. S&P 500 futures fell about 0.4%, and Nasdaq futures declined around 0.5%. 

The weaker regional market performance came as higher crude prices and renewed concerns over US interest rates added to the uncertainty created by the US-Iran escalation. 

Fed Rate-Hike Odds Rise To Nearly 60% 

Expectations for a September US Federal Reserve rate increase also strengthened. Markets raised the probability of a September rate hike to around 57–60%, compared with roughly 35% before recent hawkish comments from Federal Reserve Chair Kevin Warsh. Analysts also expect two additional rate increases this year, in September and December. 

The repricing of US monetary policy came alongside higher oil prices and geopolitical concerns. The combination was reflected in elevated global bond yields, with the two-year US Treasury yield around 4.34% after a sharp rise on Friday. The 10-year yield had also moved higher. 

Rupee Opens At ₹95.56 As Dollar Strengthens 

The Indian rupee opened at around ₹95.56 per US dollar, compared with Friday’s close of approximately ₹95.43, representing a weakening of about 13 paise. Higher crude prices, stronger US rate-hike expectations, a firmer dollar and geopolitical uncertainty weighed on the currency at the opening. 

The dollar index remained close to a two-week high, while the yen weakened beyond 160 per dollar. The combination of higher oil prices, a weaker rupee and elevated US yields formed part of the external market backdrop during the opening session. 

MSCI Rebalance Adds ₹31 August Market Volatility 

Monday’s session also included portfolio adjustments linked to MSCI index changes taking effect on 1 September. Index-tracking funds were expected to make the relevant changes on 31 August. 

The changes included additions of Laurus Labs, Lenskart, Adani Energy Solutions and Groww, while Balkrishna Industries, SBI Cards and Astral were among the exclusions or replacements. There were also changes to the weights of Reliance Industries and Adani Enterprises. 

The MSCI adjustments were expected to affect individual stocks through institutional flows, although their broader index impact was expected to be limited because the new constituents were not all major headline-index components. 

New Closing Auction Session Adds Late-Day Uncertainty 

The MSCI changes are also being implemented under India’s new Closing Auction Session (CAS), introduced on 3 August. The mechanism uses a roughly 20-minute auction to determine official closing prices, replacing the previous method based on trades during the final 30 minutes of continuous trading. 

The 31 August session represents an important test of the new mechanism because MSCI-related portfolio adjustments are taking place at the same time. The combination of MSCI flows and relatively limited CAS liquidity could result in sharp movements in individual stocks towards the close, although this mechanism was not a direct explanation for the early-session rise in India VIX. 

HDFC Bank Gains 2.1% And Limits Market Weakness 

HDFC Bank rose roughly 2.1% at the open following the announcement that CEO Sashidhar Jagdishan would not seek reappointment when his term ends in October. Analysts viewed the leadership transition as potentially positive for the bank’s strategy. 

The announcement had been made over the weekend and was therefore not a new 31 August event. Its early share-price strength provided an offset to weakness elsewhere in the market rather than representing a fresh catalyst for India VIX. 

August Seasonality Shows 10.16% Average Change 

India VIX has recorded positive returns in 12 of 18 years during August. The index’s maximum positive August change was 68.84% in 2015, while the average positive change was 18.10%. Its maximum negative change was -11.26% in 2016, with an average negative change of -5.72%. The average change for August stands at 10.16%. 

India VIX’s technical trend remained Neutral during Monday’s early session, while its 52-week low and high stood at 8.72 and 28.90, respectively. The index’s five-year return was 19.94%. 

What Drove the Early India VIX Move 

The opening-session rise in India VIX followed a combination of overnight geopolitical escalation, higher crude prices, weaker Asian markets, increased expectations of a September US rate hike, rupee weakness and a lower opening in Indian equities. The MSCI rebalance and new closing mechanism represented additional market-specific factors for the session, particularly towards the close, while HDFC Bank’s gains provided an offset. 

India VIX rose from 10.68 at the open to 11.34 by 10:28 IST, while Nifty 50 and Sensex opened lower. The session’s early volatility backdrop included US-Iran escalation, Brent near $90, weaker Asian markets, higher US rate-hike expectations, rupee weakness and MSCI-related positioning. 

Source 

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