When you perform an indole test, you drop Kovac's reagent into a tube
of tryptone broth. The Kovac's layers on top of the broth. if indole
is present, it diffuses into the Kovac's, and turns the indicator red.
The red remains in the top layer because thats where the indicator is.
A negative test (no color change in the Kovacs) simply means that the
bateria doesn't hydrolyze tryptophan to release free indole.