India's VIX Posts Weekly Advance as Derivative Contracts Expire

  • Volatility increases ahead of RBI policy meeting next week
  • Indian markets closed on Friday for a public holiday

India’s benchmark gauge for option costs posted its biggest weekly advance in four weeks as the monthly derivatives contracts expired on Thursday.

The India VIX index, the benchmark gauge of equity-option prices, rose 0.9 percent to 20.88, taking this week’s advance to 14.2 percent. The gauge slumped 27 percent last week, the most since May 2014. Futures investors have extended 56 percent of the September contracts before their expiry on Thursday, according to data available as of 3:56 p.m. in Mumbai, compared with a six-month average of 65 percent.

Implied volatility rose as Asian markets dropped amid concern over a slowdown in China. Investors are looking ahead to see whether the Reserve Bank of India will lower interest rates on Sept. 29 to bolster the local economy and spur a recovery in company earnings. Governor Raghuram Rajan left the main rate unchanged at 7.25 percent in August after three cuts in 2015. Indian markets are closed on Friday for a public holiday.

“We may see an increase in volatility and the Nifty may see expiration of current series” above 7,800, Gaurav Bissa, a derivatives analyst at LKP Securities Ltd., told Bloomberg TV India today. “Rollovers in Nifty are a tad below average and they don’t indicate market direction as open interest additions in the last two months were minimal.”

Nifty call options with a strike price of 7,900, and 7,800 puts, had the highest number of outstanding contracts. The 50-stock Nifty index rose 0.3 percent to 7,868.50.

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