India’s benchmark measure of option prices rose to a 10-week high after foreigners sold the nation’s assets and concern increased that earnings growth will weaken.
The VIX Index soared 10 percent to 20.55 at the close in Mumbai, its highest since Feb. 26. The Nifty slumped 2.4 percent to 8,126.95 and the S&P BSE Sensex slid 2.3 percent to 26,877.48. Global investors sold $55 million of local stocks on Friday, an 11th day of outflows and the longest streak since Dec. 24, according to data compiled by Bloomberg.
Stocks tumbled as the rupee fell toward a 20-month low after global funds sold the nation’s assets amid concern over the pace of earnings growth. Delays in the passage of legislation such as the goods-and-services-tax bill in the upper house of parliament, where Prime Minister Narendra Modi’s Bharatiya Janata Party doesn’t have a majority, have also weighed on investor sentiment.
“The uncertainty with regard to the GST bill and the weakness in the rupee is leading to a spurt in volatility,” Sahaj Agrawal, a vice president of derivatives at Kotak Securities Ltd. in Ahmedabad in western India, said in a phone interview. “The Nifty can drop to the 8,000 level.”
Nifty 8,500 calls and 8,000 puts were the most popular options by the number of outstanding contracts.
The rupee retreated 0.6 percent to 64.2063 per dollar as of 3:56 p.m. in Mumbai. The currency had fallen to 64.28 on May 7, the weakest level since September 2013. In addition to their withdrawals from the equity markets, overseas investors also sold a net $942 million of rupee notes last week, the biggest outflow since July 2013, data compiled by Bloomberg show.
The Nifty entered a so-called correction on Thursday, with the gauge dropping 10 percent from its record high on Jan. 29. The gauge is valued at 15 times its 12-month projected earnings, compared with a multiple of 12.3 for the MSCI Emerging Markets Index.
(An earlier version of this story corrected the headline to show VIX’s level after the gain.)