India’s benchmark gauge of option costs posted its biggest weekly drop in almost a month as optimism sparked by monsoon rains helped the 50-stock CNX Nifty index advance a sixth day.
The India VIX Index slid 5.8 percent to 15.1 at the close, taking the week’s loss to about 14 percent. The Nifty rose 0.6 percent to 8,224.95, capping its longest rising run since the period ended April 13.
The Nifty has climbed 3 percent this week as the progress of the monsoon eased concern that food costs will rise, leading the central bank to pause on interest rate cuts. Trading volume in Nifty stocks was as much as 22 percent below the 30-day mean as incessant rains in Mumbai halted commuter trains that ferry as many as 8 million people everyday, including traders in the stocks, bonds and currency markets.
“Implied volatility is declining due to the stocks’ up move,” Ravi Sharma, derivatives analyst with Prabhudas Lilladher Pvt. in Mumbai, said in a phone interview. The advance in stocks “is a bit exaggerated due to less institutional participation” amid rains in Mumbai.
The total number of outstanding Nifty options rose to 5.49 million from 5.3 million at Thursday’s close. Nifty puts with a strike price of 8,000, and 8,400 calls, were the most popular by the total number of active contracts.