India VIX at 15-month low as market stays calm; muted volatility to persist

India VIX, the measure of market volatility in the domestic market, has fallen for the third straight month and is down 37 per cent so far since May

India’s market volatility index has slipped to a 15-month low, with analysts attributing the decline to the absence of major geopolitical triggers and expecting the subdued volatility to persist in the near term.

 

India VIX, the measure of market volatility in the domestic market, is currently trading at 11.4, the lowest closing since April 29, 2024. The gauge has fallen for the third straight month and is down 37 per cent so far since May. 

 

The volatility gauge measures the market's expectation of future volatility based on Nifty50 index options contracts. It typically rises when market volatility is expected to increase, indicating higher uncertainty or risk in the near future.

 

   

Currently, there are no major immediate events expected, which is why the VIX is at its lowest level in about 15 months, according to Nilesh Jain, head of derivatives and technical research at Centrum Broking. "We’ve also seen a steady decline in implied volatility (IV), which is actually supportive for the market," he said.

 

It appears that markets have already priced in most domestic and global uncertainties. Even with concerns like trade wars, India has remained relatively insulated from tariff-related tensions, Jain added. "The overall sentiment is calm, and there doesn’t seem to be any major concern on that front." 

 

Earlier concerns, such as geopolitical tensions, particularly around US President Trump's tariffs, have also eased, said Chandan Taparia, head of technical and derivatives research at Motilal Oswal Wealth Management. "There’s stability in crude oil prices and no immediate concerns around central banks like the Federal Reserve (FOMC) or the Reserve Bank of India (RBI). With most major events behind us, the focus has shifted to quarterly earnings."

 

Global stability across equity markets, including in indices like the Dow Jones, is another reason why India’s volatility remains subdued, Taparia noted. The CBOE VIX, America’s volatility index, has dropped over the past four months, he added.

 

Unless a major new negative trigger emerges, VIX is expected to stay at lower levels, Taparia said. "We saw strong momentum from March to June, which suggests the market’s base is gradually shifting higher. Even small declines are being absorbed, whether by domestic institutional investors or otherwise." 

No Jane Street Impact

There is no connection between the decline in India VIX and the Jane Street ban, analysts clarified. The curb on trading by Jane Street has already played out, Jain said.

 

“Since this is based on the Nifty Index options contracts, some might think there’s a connection. But India VIX reflects overall market sentiment, not direct movements in the options market,” he explained. Investors need to assess implied volatility to understand activity in the options market more precisely.

 

Taparia also emphasised that the current low VIX levels are not related to the ban on Jane Street.