As exit polls scream Modi 3.0, D-Street 'volatility crushed' 22% to 19 level
India VIX fell 22% to the day's low of 19.12 on Monday after a screaming call by exit polls suggesting the return of the incumbent Bharatiya Janata Party (BJP) led NDA government. At 1:20 pm India Vix stood at 20.21, down by 17.85% from 24.60 on Friday.
According to the average of 12 exit polls, NDA is seen as winning 367 seats this time, improving its 353 count in the 2019 elections. Even the lowest forecast is that of 316 seats. While the NDA may fall short of its ambitious 'Abki Baar 400 Paar' target, traders see Nifty going beyond 24,000 this week.
While exit polls are estimates given by pollsters, actual results will be announced on Tuesday.
«The markets are riding a wave of optimism, propelled by the exit polls suggesting a decisive win for the NDA government, reflecting the sentiment driving the surge to an all-time high of 23,122,» Suman Bannerjee, CIO, Hedonova said.
The rally is likely to sustain if the NDA wins while any surprises might trigger volatility, Bannerjee cautioned.
Sahaj Agarwal, Head of Derivatives Research at Kotak Securities expects a reduction in volatility, which in market parlance is called "volatility crush". Typically, a market-impacting event leads to an irrational increase in implied volatilities (IVs) of options which primarily occurs due to the fear and uncertainty surrounding the event's outcome, he reasoned.
«High implied volatilities are attractive for option sellers and provide momentum for option buyers. The transition back to a low IV regime is often drastic, making
