Options traders in India increased bearish bets to a 14-month high as they brace for greater volatility before the federal budget.

The ratio of outstanding CNX Nifty index puts versus calls rose to 1.38 at 12:46 p.m., the highest since Oct. 31, 2013, according to data compiled by Bloomberg. The India VIX Index fell 4.3 percent, its first decline in three days.

The 50-stock Nifty rallied 0.8 percent to 8,619.75, poised for a record close. The buildup in puts comes amid uncertainty linked to various global and local events, including the European Central Bank’s policy outcome this week, corporate results for the October-December period and the federal budget expected next month, according to Supreeth Shankarghal, a Bengaluru-based director at hedge fund QF Assets.

“Institutional investors don’t want to be caught on the wrong foot, and so they are hedging their cash positions through puts as stocks have rallied sharply,” Suniil Pachisia, vice president at Pratibhuti Viniyog, said by phone from Mumbai today. “Foreigners are selling derivatives and are buying in cash market.”

International investors purchased $ 197 million of stocks on Jan. 16, taking this year’s inflows to $ 156 million, according to data compiled by Bloomberg. Foreigners sold a net $ 106 million of CNX Nifty Index options yesterday, halting 22 straight days of net purchases, the longest streak since August 2007, data compiled by Bloomberg show.

Reserve Bank of India Governor Raghuram Rajan, who lowered borrowing costs to 7.75 percent from 8 percent last week, has said continuing disinflationary pressures and the government’s fiscal consolidation would be critical for further easing of monetary policy.

Five out of the six Sensex companies that have so far announced results for the December quarter have beaten or matched analyst estimates. Profits at 67 percent of the 30 Sensex firms beat or matched estimates in the September quarter, versus 46 percent in the three months ended June and 60 percent in March, data compiled by Bloomberg show.

The Nifty has risen 4.1 percent this month, after climbing 31 percent last year for its best annual increase since 2009. The gauge is valued at 15.8 times its projected 12-month earnings, compared with a multiple of 10.6 for the MSCI Emerging Markets Index.

To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net

To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Phani Varahabhotla, Ravil Shirodkar