Volatility index surges by 8.57%: IT, auto stocks drive markets to new records

Even as the markets continued to hit record highs, the India volatility index (VIX) zoomed by 8.57%. The benchmarks on Monday rallied in anticipation of strong quarterly earnings and the optimism around the Budget. Information technology (IT) and automobile stocks helped lift the markets. The Nifty jumped 137.5 points (0.96%) to close at 14,484.75 while the Sensex rallied 486.81 points (1%) to close at 49,269.32.

HCL Tech was the top gainer in the Sensex pack, vaulting 6.09%, followed by Infosys, HDFC, Maruti, Tech Mahindra, Bajaj Auto and M&M. On the other hand, Bajaj Finserv, Bajaj Finance, Reliance Industries, L&T, Kotak Mahindra Bank and SBI were among the laggards, shedding up to 1.92%.

The India VIX, also known as the fear gauge of the market, zoomed during the session. It ended at a 20-day high. The fear gauge helps investors and traders predict the volatility expectation for the span of around 30 days. The India VIX zoomed by 8.57% to close at 22.38. Its previous close was at 20.64. Experts believe that the VIX zoomed on account of weakness in the broader market and banking stocks.

The broader market indices, Nifty Midcap 100 and Nifty Smallcap 100, declined by 0.24% and 0.04%. The banking index, Nifty Bank, was down by 0.27%.

Gaurav S Ratnaparkhi, senior technical analyst, Sharekhan by BNP Paribas, said: “Basically, the Nifty went higher led by select stocks belonging to the IT sector, and the broader market remained under pressure, which led to the rise in volatility. The market volatility is set to increase ahead of the Budget.”

The benchmarks rallied on account of strong buying in IT stocks after stellar results reported by Tata Consultancy Services (TCS). Investors are expecting a strong quarter for IT firms, leading to a surge in their stock prices on Monday. The Nifty IT index rallied by 3.31%. Shares of TCS soared 1.59% to close at Rs 3,170.45. The market capitalisation of the tech giant crossed Rs 12 lakh crore during the trading session.

The biggest gainers on the Nifty IT index were HCL Technologies, Infosys, Wipro, L&T Infotech and Mphasis with gains of 5.89%, 4.87%, 3.92%, 3.86% and 3.72%, respectively. Brokerages expect the information technology sector to lead the earnings recovery in fiscal year 2022.

Motilal Oswal in its report said “In FY22, we expect BFSI, Auto, IT, and Reliance Industries to lead the earnings recovery.” It expects healthy order pipeline and large deal signings to drive outperformance of IT companies in Q3 as opposed to companies’ guidance in Q2 of FY21.

Foreign portfolio investors bought stocks worth $418.5 million while domestic institutional investors sold stocks worth $348 million.