April was calm for markets, but don't let that fool you

livemint.com:

MUMBAI : April's subdued stock market volatility that has remained lower than in regular election years may just be the calm before the storm. Outstanding positions in marketwide futures hit a record ₹4.38 trillion on Thursday when the May series of derivatives began, pointing to a volatile month ahead.

Marketwide futures include single stock futures and index futures (Nifty and Bank Nifty). While the market has priced in a victory for the ruling National Democratic Alliance when the results are announced on 4 June, the focus will be on the victory margins, as various election phases conclude during the month.

Also read: Indian stock market likely to see profit-booking after Lok Sabha elections 2024, says Bernstein “May is gearing up to be an action-packed month with national elections on the horizon, and the anticipation of outcomes could lead to heightened volatility in the market," said Abhilash Pagaria, head of Nuvama Alternative & Quantitative Research. "Election results, expected in the first week of June, will likely be a focal point for investors, particularly with the current ruling government poised for another term.

While the outcome seems certain, attention will shift to the margin of victory, which could spark market excitement." Muted volatility in comparison to the 2014 and 2019 general elections also suggests complacency in the market. Also read: Elections 2024: How will they impact markets and what should investors do? In 2014 and 2019, Lok Sabha election results were announced in May.

In the preceding month, April, fear gauge Vix traded at 34% and 29% respectively, signalling high volatility. Currently, the Vix is around 10%, which shows the market has discounted the NDA victory, said Rohit Srivastava,