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India’s key measure of equity risk expectations slid to a record low Tuesday, as investors awaited the outcome of the six-week long national election.

The tumble of as much as 20% in India VIX Index reflects expectations of the ruling party retaining power in the ongoing polls as well as the recent easing in tensions in the Middle East, said one market participant.

“The fall in the VIX gives massive comfort to the bulls,” said Om Mehra a technical analyst at Mumbai-based Samco Securities, who expects the benchmark Nifty 50 Index of equities to hold its level through the election. After adding almost 3% so far this year, the measure is set for a modest gain of less than 0.5% this month.


India’s fear index, an indicator of near-term market volatility based on the prices of derivative option contracts, typically cools off after key political events conclude. The gauge tumbled 20% after the results of the general elections in 2014 and 2019 were announced.

Still, some market participants say investors should watch if the fear gauge sustains near its record-low level for a confirmation that volatility will stay subdued.

With the next leg of the election due on April 26, most polling surveys indicate an alliance led by Prime Minister Narendra Modi’s party will win a third straight term. Votes will be counted on June 4.


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