The benchmark gauge of Indian equity-option costs headed for a second week of declines, reflecting weaker demand for protection against market swings and uncertainty.
The India VIX Index dropped 0.4 percent to 15.79 at 12:58 p.m. in Mumbai, set for a weekly loss of 11 percent. The Nifty 50 Index climbed toward its first weekly advance in four weeks after a government panel recommended a nearly 24 percent increase in salaries and allowances of federal employees.
The subdued demand for call and put options shows traders are looking ahead to events including the Reserve Bank of India’s interest-rate decision and the U.S. non-farm payrolls data, scheduled for next month, according to Abhimanyu Sofat, the Mumbai-based co-founder of AdviseSure Ventures Pvt., an investment advisory firm.
“India VIX usually gets decent support around 15 levels,” Sofat said in a phone interview on Friday. “Traders are paring their hedges as no major events are lined up over the next seven days. I expect a marginal positive impact” from the proposed wage increases, he said.
Consumer stocks led the equity-market rally on Friday after the Seventh Pay Commission’s recommendations, which will benefit nearly 10 million workers and pensioners, and cost the government more than $15 billion in the next financial year if they’re accepted.
The government is confident of sticking to its fiscal deficit road map, Shaktikanta Das, economic affairs secretary, said in an interview with Bloomberg TV India on Friday. The administration aims to shrink the shortfall to 3 percent of GDP in the year through March 2018.
Nifty put options with a strike price of 7,700, and 8,000 calls, had the highest open interest. The Nifty 50 rose 0.7 percent to 7,895.75.