Investors trading in Indian bank options are buying the most protection in eight weeks as a gauge of lenders’ shares rallied to a record high for a fourth straight day.

The number of outstanding puts per call in the 12-member CNX Bank Nifty index rose to 1.67 at 4:20 p.m. in Mumbai, the most since Nov. 24. The underlying Bank Nifty, the second-most popular security for derivatives trading in India after the 50-stock CNX Nifty Index, climbed 0.4 percent to 19,917.65 to close at an all-time high. A put with a strike price of 19,000, which may become profitable for a buyer below that price level, was the most active among its options by outstanding contracts.

The rally in financial companies has led local equities after the Reserve Bank of India last week announced an unscheduled cut in borrowing costs. The Bank Nifty index is valued at 14.7 times its projected 12-month earnings, compared with an average multiple of 12.3 over the past five years. The MSCI Emerging Markets Asia Financials Index trades at 8.6 times, according to data compiled by Bloomberg.

“When the surge in banks and broader markets is so swift, there is not much option but to increase hedges,” Abnish Kumar, director of New Delhi-based Amrapali Aadya Trading & Investment Ltd., said in a phone interview.

Axis Bank Ltd. (AXSB), the biggest gainer by percentage on the Sensex in 2014, advanced 3.2 percent to 564.75 rupees. ICICI Bank Ltd., the nation’s second-largest lender, and IndusInd Bank Ltd. rose 0.4 percent each. All three closed at record highs.

The India VIX Index, a gauge of protection against stock market swings using options, increased 4.8 percent to 18.57, a six-month high. The Nifty index and the benchmark Sensex both climbed 0.4 percent, closing at record highs after a sixth successive day of gains.

The Sensex is this month’s best performer in U.S. dollar terms among 93 primary equity indexes tracked by Bloomberg.

To contact the reporter on this story: Santanu Chakraborty in Mumbai at

To contact the editors responsible for this story: Michael Patterson at Phani Varahabhotla