India Stock Hedges at 7-Month High Versus U.S. After Delhi PollsSantanu Chakraborty
The cost to protect against declines in Indian equities climbed to the highest level in seven months compared with U.S. stocks, a sign foreign investors expect the Asian nation’s stocks to underperform.
Exit polls over the weekend after local elections in the state of Delhi predicted a defeat for Prime Minister Narendra Modi’s Bharatiya Janata Party. The potential setback spurred concern opposition parties may be emboldened to block many of Modi’s economic policies in the upper house of parliament, where the BJP is in minority.
The India VIX Index, a measure of protection against stock swings, rallied 6.4 percent to 22 at the close, widening the spread against the Chicago Board Options Exchange Volatility Index, or VIX, to the most since July 10, data compiled by Bloomberg show. The VIX, derived from the cost of options on the Standard & Poor’s 500 Index, has declined 34 percent from a 16-month high reached in October.
“Key events like the Delhi state election results and the budget will impact sentiment,” said Amit Khurana, director of research at Dolat Capital Market Pvt. A BJP defeat “will be an excuse for the market to exhibit near-term volatility.”
Foreigners sold $215.8 million of CNX Nifty Index options and $191.1 million of index futures on Friday, data compiled by Bloomberg show. India’s federal budget for the financial year starting April 1 is due to be presented in parliament on Feb.
28. The Delhi voting results are due Tuesday.
The Nifty Index fell for a seventh day today, the longest run of losses in 15 months, after earnings of some of India’s biggest companies, including Tata Steel Ltd., missed estimates. Foreigners have withdrawn a net $101 million from local shares this month through Feb. 5, data compiled by Bloomberg show.
Overseas funds bought $16.1 billion of local shares in 2014, the most among eight Asian markets tracked by Bloomberg, after Japan. The Nifty climbed 31 percent last year for its best annual increase since 2009.