Volatility flushing out extreme positions; bias remains positive: Standard Chartered

NEW DELHI: The rise in volatility in local markets is, to a lrge extent, due to a spill-over effect of volatility in global markets, Manpreet Gill of Standard Chartered bank said.

This spill-over effect is more pronounced, because investors had built long positions since the general election results last May, and in the event of global volatility, investors tend to sell in markets where they have a sizeable holding, he explained.

Hence, the current volatility is not surprising, coming as it does on the back of a long and large run-up after the new government took charge at the Centre last may, he said.

Global investors, who had been overweight on India in the past year or so, are taking funds away in an act of allocation rebalancing, Gill said.

Besides, a couple of mixed economic data locally, as also fears of delay in enactment of key legislations has the investors turn a bit unenthusiastic, he explained.

"This kind of period is great to sort of flush out extreme positioning and for us, bias still remains very positive when you look through this period," Gill said.

India's volatility Index rose as high as 21.62, its highest since February 25, with no major event in sight.