As the Indian market approaches the final election results on June 4, 2024, volatility has been a key feature of market behavior. This period is crucial for investors and market participants, as it brings heightened uncertainty and potential for significant market movements. Let’s get into the current state of volatility and explore the expectations for the market trends in the short and medium term.
Understanding the Current Volatility
The Surge in Volatility
In the weeks leading up to the election results, the India VIX Index, a key indicator of market volatility, experienced a significant surge. This rise can be attributed to several factors:
- Political Uncertainty: Elections are inherently uncertain events that can lead to changes in government policies, impacting economic conditions and investor sentiment.
- Economic Performance: The Indian economy’s strong performance, with a 7.8% growth in Q4 FY 2024, surpassing analyst expectations, has also contributed to market fluctuations. This robust economic data can lead to increased market activity as investors adjust their positions based on new information.
Nifty 06th Jun 2024 – ATM Short Straddle
The breakeven points of weekly ATM straddle are at 22,619 on the downside and 23,881 on the upside. I am expecting the price to potentially reach the upper breakeven level of 23,800+ INR, indicating a bullish outlook or at least significant upward movement for this weekly expiry. Usually when volatility is there it could break any of the straddle direction
Volatility Collapse
Following the initial surge, the India VIX Index showed a sharp drop, a phenomenon known as “volatility collapse.” This occurs as the market begins to price in the potential outcomes of the election, reducing some of the uncertainty that previously fueled volatility. Despite this collapse, the current levels of the VIX suggest that there is still enough volatility to impact market movements significantly.
Market Expectations
Short-Term Trend: Up
Given the current economic indicators and market sentiment, the short-term trend for the market appears to be upward. The strong GDP growth and the overall positive outlook for the Indian economy are likely to continue supporting this trend. Investors seem to be optimistic about the economic policies and their potential impact on corporate profits and market conditions.
Nifty Futures Hourly Charts
Medium-Term Trend: Up
Looking beyond the immediate aftermath of the election results, the medium-term trend also appears to be upward. The fundamental strength of the Indian economy, as evidenced by the impressive GDP growth figures, suggests a resilient market capable of sustaining an upward trajectory. Moreover, the ongoing reforms and policy measures aimed at boosting economic growth are likely to further bolster market confidence and drive sustained growth.
As we approach the final election results, the market is characterized by significant volatility, driven by political uncertainty and strong economic performance. Despite the recent volatility collapse, the market is expected to continue its upward trend in both the short and medium term. Investors and market participants should stay informed and vigilant as the election results unfold, as these outcomes will play a crucial role in shaping market movements in the coming days and weeks.
