India VIX jumps ahead of election results, stock market braces for higher volatility amid recovery

Volatility index India VIX concluded the month of November at 12.69, marking a 8.18 percent monthly gain. This represents the highest monthly closing since April 2023. However, as elections approach and bullish signals hint at a market recovery, there is anticipation of further surge in volatility. The volatility gauge is trading around 12-13 at the start of the December series.

Sudeep Shah, Head of technical and derivative research at SBI Securities, said: "India VIX, which had surged 12-14 percent in the past three sessions, is indicative of the fact that options market participants were hedging their existing long positions with Index Options ahead of the results of the 5 State Election later this week."

Earlier in November, the VIX had dipped as low as 8 intraday, making it very difficult for option sellers to make money. Arun Kumar Mantri, Founder of Mantri Finmart said, "India VIX made a low of around 8.4 in the November series amid a lack of any major triggers in the markets, with indices moving higher with positive momentum."

Volatility is one of the major factors determining options value. Lower VIX makes options cheaper leading to smaller premiums available for options writers. This makes it difficult for option writers to make sizeable profits.