Calm Vix index seen flaring up in wake of Lok Sabha elections in 2024

The India VIX index, which measures market volatility, remained subdued during the first half of the current financial year, registering an average of just 11.6 per cent. 
 

This low figure signalled a bullish market sentiment, suggesting that stocks might remain steady, market insiders noted. 
 

The Nifty50 index escalated by 13 per cent during H1FY24, while the Nifty Midcap 100 and the Nifty Smallcap 100 indices witnessed surges of 35 per cent and 45 per cent, respectively.
 

Despite experiencing sharp intraday fluctuations in recent sessions, the VIX index has consistently settled below 12. 

 

Chandan Tapria, Head of Derivatives & Technical Research at Motilal Oswal, remarked: “The domestic markets displayed robustness during the first half without any detrimental triggers. The next major domestic catalyst we foresee is the general elections in 2024.”
 

However, market experts anticipate a potential surge in the VIX index in the latter half of the year. Factors such as rising US bond yields, global oil prices, and the impending domestic state and national elections could influence market volatility.
 

Elevated readings on the India VIX index are crucial as they can impact market valuations.
 

Anurag Singh, a quantitative strategist at Kotak Institutional Equities, opined: “Based on our model comparing the index's forward earning yield against expected growth, return on equity, VIX, and 10-year yields, the Nifty index appears around 10 per cent overpriced. Historically, the fourth quarter has been the weakest for Indian equity market returns. Given these factors, we approach the anticipated index returns in the upcoming 3-6 months with caution.”