The Hindu Business Line : Volatility index increases to 49 – highest close since January 28 crash

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Volatility index increases to 49 – highest close since January 28 crash

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Chennai, July 15 Turnover remained modest at Rs 44,122.92 crore against Monday’s figure of about Rs 40,096 crore. The discount of Nifty July future with respect to the spot close jumped to 32.2 points, mainly on account of fresh short positions. The Nifty July future closed at 3828.9 and the August future at 3810.65 against the Nifty spot close of 3861.10.

Among the options, Nifty 4,000-strikes of put and call was the most-actively traded. While Nifty calls saw sharp accumulation in open positions, the puts witnessed squaring-off activity. This suggests the emergence of call writers, even at the 4,000-strike, indicating downward bias for the market. The squaring-off puts point that writers are not willing to take their risk.

India VIX

The NSE Volatility index or the India VIX jumped it 49.77 – the level which it did not touch since January 28 crash. In fact, on January 28, the index closed at 54.4 – the highest so far in this month. This indicates panic setting into the market. The Volatility index, which generally reflects the fear among market participants, is a measure of market’s expectation of volatility over the near term.

It may be recalled that the reading of VIX reached almost 45 in 1998 as the LTCM (Long-term Capital Management) crisis exploded. It took a few months for the investor’s fears to abate and the VIX to return to below 20. The World Trade Centre bombing also made the VIX climb above 45, as the investors’ fear level reached the zenith.

Stock futures

Reliance and Ranbaxy were the most actively-traded counters. Ranbaxy July future saw sharp accumulation in open interest and also ended in premium at 411.35 against the spot close of 409.2, presenting positive outlook for the stock.

Tata Steel, on the other hand, ended in sharp discount at 632.05 against the spot close of 647.9. It also witnessed sharp fall in open interest positions, presenting cautious outlook for the stock.

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