Indian equity markets ended lower on Monday with the Sensex declining 442.93 points (0.57%) to 77,708.52 and the Nifty 50 falling 95.80 points (0.39%) to 24,238.50, as reported by Business Standard. The NSE's India VIX, a gauge of market volatility expectations, fell 1.29% to 12.98, indicating reduced near-term market uncertainty. Despite the benchmark decline, broader markets outperformed with the BSE 150 MidCap Index adding 0.47% and the BSE 250 SmallCap Index rising 0.21%. Market breadth remained positive with 2,226 shares rising and 2,039 shares falling on the BSE, while 255 shares remained unchanged.
The National Stock Exchange has initiated preliminary discussions on developing a new volatility index with revised methodology, according to reports from Business Standard. The exchange is considering multiple methodologies for the pilot launch, with testing expected to begin shortly followed by consultations with market participants, academics and other industry stakeholders. As reported by sources familiar with the developments, the pilot may involve testing how the index behaves on different volatile days and whether it correctly reflects market movements, with testing potentially taking several months.
According to sources cited by Business Standard, one reason for exploring such an index could be to launch derivatives contracts linked to it. This development comes after NSE had launched India Vix futures in 2014 but discontinued them in 2017 due to low liquidity and participation. For the new index, the exchange may have to seek fresh approval from the market regulator, the Securities and Exchange Board of India (Sebi), for any derivatives contracts. Responding to queries, NSE confirmed that it has filed a draft red herring prospectus with Sebi and is unable to provide further comments at this stage.
As reported by Business Standard, India Vix currently serves as a barometer of near-term market volatility and risk, measuring the rate and magnitude of price movements. The index is based on Nifty index option prices, with the volatility figure calculated from the best bid-ask prices of Nifty options contracts. The trademark 'Vix' belongs to the Chicago Board Options Exchange (CBOE) and Standard & Poor's, which have licensed its use to NSE for India Vix. An industry expert noted that all data and research for India Vix is provided by NSE, making it sensible to explore a volatility index of its own.
Private banking stocks emerged as the biggest losers, dragging markets lower following their quarterly earnings announcements, according to Business Standard reports. Among sectors, PSU banks, pharma and energy stocks advanced while private banks faced heavy selling pressure. The market decline was attributed to weak global cues, escalating Middle East tensions and elevated crude oil prices. Investor sentiment remained subdued amid these factors, though the broader market's outperformance suggests selective buying interest in certain sectors.
