Summary :
The drop in the India VIX on June 3 was attributed to the release of exit polls on the evening of June 1, 2024, which indicated a clear majority for the BJP-led NDA alliance.
The India VIX, a measure of fear in the Indian stock market, dropped by 22 percent during morning trading on Monday, June 3. Investors seemed to brush off concerns related to the Lok Sabha elections. The India Volatility Index, which tracks market volatility, decreased by 22.2 percent to 19.21 levels from Friday's closing level of 24.6, following exit polls forecasting a significant win for the Bharatiya Janata Party (BJP) and the National Democratic Alliance (NDA) in the 2024 Lok Sabha elections under the leadership of Narendra Modi.
The sharp decline in the India VIX on Monday, June 3, was primarily attributed to the release of exit polls on June 1, 2024. These polls indicated a significant victory for the BJP-led NDA alliance, projecting an average seat tally of 370 seats compared to 353 in the 2019 elections. Specifically, for the BJP, the projections ranged from 320 to 330 seats, with Axis My India (AMI) estimating 331 seats. Moreover, AMI forecasted nearly 400 seats for the NDA as a whole. Alongside seat projections, the exit polls suggested an increase in the BJP's vote share by approximately 300 basis points, rising from less than 37% to nearly 40%, while the NDA's share was expected to reach 47%. This optimistic outlook instilled confidence among investors, leading to a substantial reduction in market volatility as reflected by the India VIX.
Before the release of the Exit Polls, the India VIX had been steadily climbing, mirroring the heightened uncertainty surrounding the 2024 Lok Sabha elections in India. Starting from a 52-week low of 8.4, the India VIX surged by an impressive 191%, reaching over 24 levels the previous week. Within just one month, it had escalated by over 100%. This upward trajectory of the VIX posed challenges for the stock markets, as the increased volatility made it challenging for them to maintain their record-high levels.
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