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

The Economic Times - - Front Page - Sanam.Mir­chan­dani @times­

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.

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