Volatility index rises to a 10-week high

An Indian gauge of protection against stock-market swings rose to the highest level in 10 weeks, after foreigners made the biggest net purchases of CNX Nifty index options in nearly two months.

The India VIX Index climbed 4.6 per cent to 15 as of 1:17 pm here, poised for the highest close since August 1. Foreign investors bought a net $362 million of Nifty options on October 10, the most since August 19, data compiled by Bloomberg show. Foreigners also sold a net $239 million from Nifty futures contracts on October 10. That's the biggest sale since August 8 and the second-biggest since September 3 last year.

"Foreigners are buying index options and selling futures amid higher global risk perceptions," Manoj Vayalar, assistant vice-president of derivatives at Religare Securities, said in a phone interview on Monday

"Demand for options is pushing India VIX higher." The increased need for protection comes as Asian equities fell, extending a rout that wiped $1.54 trillion from global shares last week, amid concern that pledges to keep record-low interest rates won't be enough to offset a global slowdown. Traders held as many as nine bearish contracts on the India VIX index for every 10 bullish ones, the highest put-to-call open interest ratio since September data compiled by Bloomberg show.

The Nifty lost 0.1 per cent to 7,853.40 in Mumbai, extending last week's 1.1 per cent retreat. Foreign investors have sold $103 million of Indian shares this month, paring inflows in 2014 to $13.7 billion, still the most among eight Asian markets tracked by Bloomberg.