NSE's volatility index, or India VIX, hits its highest level since March 11, 2009, and is headed for a fourth consecutive session of gains ahead of exit poll results later in the day.
India VIX measures the cost of protection via options and is seen by some investors as a "fear" gauge.
The volatility index is up 3.6%, adding to Tuesday's surge of 9.9%, just as the Sensex and Nifty surge to record highs.
Chandan Taparia, Derivative Analyst at Anand Rathi Securities says, " For the next 2-3 days until election results day we are looking at 42 levels and the market momentum may continue if VIX breaches the 42 mark. It is likely to crash after elections and if that happens premium of call options will decline sharply."
"IVs (implied volatility) of calls is higher than IVs of puts indicating that call writers are at risk and market momentum is likely to continue. A lower put ratio, which is at a one-year low, is also a cause of concern," added Taparia.