India VIX Drops Most in Eight Months Before Derivatives Expiry

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India’s benchmark gauge of equity-option costs dropped the most in eight months, as the CNX Nifty index rebounded from a 10-month low amid gains in Asian stocks.

The India VIX Index, a gauge of demand for protection against stock-market swings, sank 13.6 percent to 22.04, the most since Dec. 18. The Nifty jumped 2 percent to 7,948.95 after closing at its lowest since Oct. 17 on Wednesday. Nifty August futures rallied 1.9 percent to 7,950.20 as contracts expired. The September contract rose 2.1 percent to 7,991.95.

Option costs fell for a third day after the VIX Index surged 64 percent on Monday, the most on record, as global stocks plunged amid speculation China’s economy was headed for a deeper slowdown than previously thought. The 50-stock Nifty has dropped 6.8 percent so far in August, still on course for its steepest monthly loss since November 2011.

“The drop in VIX is a bullish signal for stocks,” Rajendra Wadher, director at PRB Securities Ltd., said in a phone interview. “The markets seem to be calming down.”

Futures traders have extended 65 percent of August contracts to future months, compared with a six-month average of 68 percent as of 3:57 p.m. in Mumbai, according to data compiled by Bloomberg. Indian equity derivatives expire on the last Thursday of every month.

The MSCI Asia Pacific Index rose 1.8 percent on Thursday after U.S. stocks rallied, halting a selloff that’s erased more than $8 trillion in global equities since China devalued its currency on Aug. 11.

Overseas investors sold a net $128.2 million of Indian equity options on Wednesday, a third day of withdrawals, after a 15-day streak of purchases. Foreigners have sold a net $1.68 billion of local shares so far in August, on pace for the biggest monthly outflow since June 2013.

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