India VIX Drops to Two-Month Low as Nifty Posts Weekly Decline

A gauge of Indian option prices used for protection against stock market swings fell to a two-month low as CNX Nifty Index halted a six-week rising streak.

The India VIX Index slid 4 percent to 11.95 in Mumbai, the lowest reading since Sept. 22. The Nifty dropped 0.3 percent to 8,538.30, extending its weekly decline to 0.6 percent. Nifty futures for December delivery slipped 0.4 percent to 8,572.

Stocks retreated this week after Reserve Bank of India Governor Raghuram Rajan on Dec. 2 left the benchmark repurchase rate at 8 percent for a fifth straight meeting. While belying some expectations for a reduction, the central bank signaled a possible cut early next year. The Nifty has risen 35 percent this year as foreigners bought $16.4 billion of local stocks, the highest inflows in Asia after Japan.

“Volatility is falling as the overall market outlook is still positive,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd., said by phone from Kollam in the southern state of Kerala today. “We expect the Nifty to trend to 8,600, buoyed by strong year-end buying by funds. The macroeconomic situation has improved a lot with the drop in oil prices and that is helping sentiments.”

Consumer-price gains in October were the slowest in data going back to the start of 2012, helped by a slide in oil prices. India imports some 80 percent of its energy needs.

The Nifty trades at 15.8 times its projected 12-month earnings, compared with a multiple of 11.2 for the MSCI Emerging Markets Index.

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