NSE volatility index, or the domestic equivalent of the VIX fear gauge, marked its lowest level since May 7 after the RBI kept interest rate unchanged in its policy review.
Fears of strengthening USD after Fed started unwinding its $85 billion bond buying program are also aiding fears of some foreign outflows.
Overseas investors have made net purchases of over $18 billion so far this year, making India the number one recipient of foreign stock investment in emerging Asia, data from Deutsche Bank showed earlier.
The low level in the VIX denotes a more stable outlook for markets in the remainder of the month.
"The risk of Fed and RBI is out of the way and VIX is therefore pointing towards stability for the remaining of December series," said Anup Chandak, senior manager of the advisory division at brokerage Sharekhan.