VIXFallsMostSince May 2014 as Fears of Long-TermTaxFade
Experts say volatility is likely to be low in Feb unless there’s a negative global event
Mumbai: India’s benchmark gauge measuring the market’s perception of volatility posted its biggest daily decline since May 2014 after the Budget eased concerns over unfavourable tax changes on long-term capital gains.
The India VIX fell 17% to end at 13.97 when trading closed after FM Arun Jaitley made no reference to changing tax laws on equity capital gains. At present, investors holding stocks beyond a year are not required to pay taxes on the gains they make on the principal invested.
Derivative analysts said volatility is likely to remain low in the markets in February unless there is any major negative global event. “The events in the near term are not likely to lead to any significant rise in the VIX,” said Amit Gupta, head of derivatives at Mumbai-based securities firm ICICIdirect.
The factors that could introduce greater volatility are a possible rate increase by the US FederalReserveandunexpected results of elections in Uttar Pradesh, India’s most populous state, which are expected to be announced on March 11.
“The state election results will influence volatility only in the March series,” said Tushar Mahajan, head of derivatives at Nomura.
Gupta of ICICIdirect said the VIX may drift lower to about 12.5 in the near term, with the upside restricted at 16.