India VIX Advances to Eight-Month High as Stocks Extend Retreat

The benchmark gauge of Indian option prices advanced to an eight-month high as stocks fell for a second day before the central bank’s decision tomorrow on interest rates.

The India VIX, a measure of protection against stock market swings, rose 1.2 percent to 21.41 at the close in Mumbai. The CNX Nifty Index slid 0.1 percent to 8,797.40, adding to its 1.6 percent tumble on Friday, the steepest in three weeks.

The number of outstanding Nifty puts per call fell to 0.89 at 3:55 p.m. local time, near the lowest level in five weeks, signaling a reduction in bearish bets. The central bank will leave borrowing costs unchanged tomorrow, according to 31 of 40 analysts in a Bloomberg News survey, while the rest see a quarter percentage-point cut. The RBI lowered the repurchase rate to 7.75 percent in an unscheduled move Jan. 15.

“Traders are playing the guessing game before the RBI meeting,” Sahaj Agrawal, a vice president of derivatives at Kotak Securities Ltd., said in a phone interview from Ahmedabad in western India. “Bearish bets have dropped after the selloff last week.”

Nifty futures for February delivery lost 0.2 percent to 8,858.95. Foreigners have purchased $2 billion of Indian shares in January spurred by budget expectations.

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