 "MARKETS SHORT OF BREADTH, YET BENCHMARKS' PULSE QUICKENS")
India VIX surges 5% on Tuesday, May 28: Equity markets were listless in trade on Tuesday as Lok Sabha elections-related jitters kept investors on the sidelines. The volatility index, India VIX, too, showed heightened investor concern as the index rose over 5 per cent intraday to hit a high of 24.48 level.
India VIX, or Volatility Index, measures the market's expectation of volatility in the next 30 days. The index has been on an uptrend ever since the 2024 Lok Sabha elections started in India.
From a 52-week low of 8.4, India VIX has soared 191 per cent to over 24 levels now. In one week, the fear gauge has advanced 12.2 per cent, and, in one month, it has sprinted 124 per cent.
The rising VIX has made it difficult for stock markets to sustain at record high levels.
The Nifty50 index, for instance, hit an all-time high of 23,111 on May 27, while the S&P BSE Sensex touched 76,009 in intraday trade The indices, however, erased all gains and ended lower on Monday.
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Why is India VIX rising during 2024 Lok Sabha elections?
Indian stock markets have been topsy turvy ever since the first phase of 2024 Lok Sabha elections happened on April 19.
As markets were discounting a resounding victory of the ruling Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA), lower voter turnout in every subsequent election phase has raised questions over the margin of victory.
The sixth phase of the ongoing Lok Sabha election, which was held on May 25, recorded a 63.36-per cent voter turnout. Around 58 seats in eight states and Union territories, including Delhi, went to polls last Saturday.
Notably, the national capital saw voter turnout of just 58 per cent.
That apart, the fifth phase saw the lowest voter turnout at 62.2 per cent; the fourth phase had 69.16 per cent; the third phase had 65.68 per cent; the second had 66.71 per cent; and the first phase of Lok Sabha 2024 elections saw a voter turnout of 66.14-per cent.
Is lower voter turnout a cause of concern?
According to analysts at Bernstein, there are no obvious correlation trends between voting percentage vs results, based on past elections.
"Dividing the voters into three categories (pro-NDA, anti-NDA, and swing) given the past trends, and assuming the bulk of the decline will be owing to the swing voters, we notice that it will take a lot more than just a drop in vote percentage for the BJP tally to be significantly dented for India Inc to start factoring in a case of non-continuity," they said in a report.
Listing its three scenarios, Bernstein said a 2-3 per cent decline in voters, along with anti-incumbency, will likely lead to BJP's tally just below the 2014 figure.
"A large decline (over 5 per cent), without much anti-incumbency, should see them repeating figures of 2019 with minor up/down revisions. Only the case of a large vote share decline (over 5 per cent) and significant anti-incumbency is where the elections become a market-defining event," it said.
Those at UBS, on their part, said any unexpected results could trigger knee-jerk reactions in stock markets in the near-term, with equity valuations possibly testing pre-NDA levels.
"Significant weakness in the stocks could offer buy-on-dip opportunities for investors," the analysts wrote. READ MORE
When will 2024 Lok Sabha election results be announced?
The Lok Sabha exit poll is likely to be announced post the completion of all seven phases on June 01.
The actual counting of votes, and announcement of Lok Sabha election results, will take place on Tuesday, June 04, 2024.
