The India Volatility Index (VIX) spiked by over 7% on Monday, reaching an intra-day high of 16.58, indicating heightened market uncertainty as investors take stock of various economic and geopolitical risks. This surge aligns with global volatility trends and reflects growing concerns in the Indian equities market.
In the domestic market too, the investors are balancing a host of concerns including the FII outflows, muted Q2 earnings and upcoming Assembly election results.
What is the VIX?
The Volatility Index (VIX) gauges market expectations about volatility over the near-term. Typically, in periods of high market turbulence, markets tend to experience sharp price swings, and the VIX tends to rise. Conversely, when volatility subsides, the VIX declines.
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Unlike price indices like the NIFTY, which are based on price movements of underlying stocks, the VIX is an annualized percentage calculated from the order book of options on a benchmark index.
Understanding the India VIX
The India Volatility Index (VIX) specifically measures anticipated market volatility in India. Calculated by the National Stock Exchange (NSE), the India VIX reflects data from NIFTY options’ order book.
Using the best bid-ask quotes of NIFTY’s near and next-month options contracts from the NSE’s Futures & Options (F&O) segment, the India VIX projects volatility over the next 30 calendar days.
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Higher readings of the India VIX denote increased expected volatility, whereas lower values suggest more stable market conditions. A rising India VIX, as seen today, signals market caution, as investors prepare for potential near-term fluctuations.
Market performance intra-day
Indian benchmark indices opened marginally higher on Monday but quickly slipped into negative territory. By 9:40 a.m., the BSE Sensex was down 455.42 points,
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