Lok Sabha poll results: Markets crash, volatility index soars over 40% amid vote counting

The stock markets are not happy with the Lok Sabha election results trends. The final tally appears to be much below what the street was expecting based on the exit polls. As a result, the volatility index or VIX soared over 40% and is in the range of 29-30. Less than 300 seats for the BJP-led NDA is a clear possibility.

The VIX is the index that gauges the extent of anticipated volatility in the market which also indicates investor sentiment. A higher VIX indicates increasing volatility due to uncertainty and investor fear while a lower VIX indicates a stable period and positive investor sentiment.

VIX soars

Amid the counting trend, share markets on Tuesday witnessed deep cuts. This comes as the trend depicts less than 300 seats for the BJP led NDA. The BSE-listed companies erased about Rs 40 lakh crore in m-cap as both the benchmark indices Sensex and Nifty fell over 7% each. Sensex fell below 72,000 points, Nifty 50 fell below the 21,200 mark.

“Uncertainty over the actual outcome of election results compared to exit polls is leading to panic amongst market participants. This has led to a rise in India VIX as demand for out-of-money options seems to be on the rise to hedge long positions and portfolios. 30-35 is the crucial range,"Ruchit Jain, Lead Research Analyst at 5paisa told Mint.

The Indian VIX topped the 30-35 range in May 2019 and February 2022 with the exception of Covid-19 Correction.

Mint quoted market experts and said that the market will continue for some time as volatility is very high due to the negative surprise in the election results. In a worst decline in the market in 4 years all the sectoral indices were trading in red on Tuesday.

PSU stocks have suffered greatly, with sectoral indexes falling by almost 15%. Out of the top losers in defence, BEL and HAL dropped by more than 18%.

Also watch: Lok Sabha polls: Sensex falls over 6,000 points, records biggest intraday fall in two years