Caution over the ongoing Lok Sabha elections continued to unnerve investors as they rushed to hedge their positions, leading to India VIX rising for the eighth consecutive session on Monday. The volatilityindicator soared 13.6% to 16.6, registering its biggest single day rise in more than a year. This was also the highest level for the index in over a year.

Market experts said there is a feeling that the ongoing Lok Sabha elections may not be a walk in the park for the ruling government. This was not the case 2-3 weeks ago.

While many still believe the ruling National Democratic Alliance (NDA)-led by Bharatiya Janata Party (BJP) will come back to power, there are divergent opinions on the number of seats that it can win.

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Experts said given that VIX was at ultra-low levels around a couple of weeks ago, even the slightest of uncertainty is leading to a sharp surge now. In eight sessions, the fear gauge has risen more than 60%.

For the uninitiated, the current level of India VIX is still significantly lower compared to what it was during the previous General Elections. For example, the index had risen till around 30 level during the 2019 General Elections and 40 during the 2014 polls.

U.R Bhat, co-founder of Alphaniti Fintech, said he does not expect India VIX to rise to the levels seen in previous elections. “I don’t think VIX can go to those levels just based on uncertainty on election-related news. But if West Asia crisis gets worse…. or if the tensions in Taiwan, Ukraine mound, then it can go further up,” he said.

Market participants also highlighted that interest rates potentially staying higher for a longer time than what was anticipated earlier is also weighing on investor sentiment.

Benchmark Sensex ended flat at 73,895.54 points on Monday after a slightly volatile trade where it moved in the range of around 570 points intraday. Nifty closed 0.2% lower at 22,442.70 points.

“India VIX is indicating that market is preparing for an expansionary phase. On the downside, I think 22,000 should be protected. But if it is broken, then we can see a fall even towards 21,000. But that seems unlikely. I’m betting on the upside towards 23,300-23,500 points, once 22,800level is broken,” said Santosh Meena, head of research at Swastika Investmart.

Meena said India VIX generally rises when demand for out-of-the-money options rises. He expects the volatility to continue until the election results are known, but does not see India VIX rising beyond 25-30 level.

Analysts recommended that investors should avoid high-beta stocks amid high volatility. Even today, the smallcap and midcap indices on the BSE dropped around 1% each, underperforming the benchmark indices.