India's Volatility Index Hits 15-Month Low Amid Calm Market, Muted Volatility Expected to Persist

India's market volatility index, VIX, has fallen to a 15-month low at 11.4, with analysts attributing the decline to the absence of major geopolitical triggers. The gauge has fallen for the third straight month and is down 37% since May. Analysts expect subdued volatility to persist in the near term due to global stability and the absence of major negative triggers.

India's market volatility index, the India VIX, has fallen to a 15-month low of 11.4, according to the latest data [1]. This decline has been attributed to the absence of major geopolitical triggers and a general sense of global stability. The gauge has been on a downward trend for the past three months, with a significant drop of 37% since May.

Analysts attribute the decline to several factors. The absence of sharp market swings and a decrease in US volatility have contributed to the calm in India's markets. Additionally, reduced trading volumes in derivatives options have played a role in lowering the VIX. Ajit Mishra, senior vice-president, research, at Religare Broking, noted that Indian markets are currently mirroring the US VIX, which is at a 7-8 month low, offering some relief to traders globally [1].

The benchmark Nifty 50 index has traded within a narrow range of 25,000-25,500 since the beginning of July, failing to break out in the absence of meaningful catalysts. This narrow trading range has contributed to the subdued volatility seen in the market. The India VIX, which measures the expected volatility in the stock market over the next 30 days based on Nifty options prices, has declined by nearly 22% in the past month, while the Nifty 50 has edged up by around 1% [1].

The subdued India VIX may also be partly due to lower participation in the options market. Dhupesh Dhameja, derivatives analyst at Samco Securities, highlighted that traders have largely avoided buying deep out-of-the-money put options, which has kept premiums low and suppressed implied volatility [1]. Additionally, a dip in activity from major global liquidity providers like Jane Street has resulted in lower trading volumes in derivatives and less depth in the options market, particularly in far out-of-the-money contracts, which usually indicate broader economic risk sentiment [1].

While the India VIX is a useful tool for gauging sentiment, it tracks only the Nifty 50 and its large-cap constituents, and may not capture broader market dynamics. Analysts caution that such low-volatility phases are often followed by sharp directional moves. Dhameja noted that while the trend may remain range-bound for now, any sudden spike in the VIX would be a "signal worth watching closely" [1].

References:
[1] https://economictimes.indiatimes.com/markets/stocks/news/india-vix-falls-to-15-month-low-on-no-sharp-market-swings/articleshow/122699330.cms