India VIX Explodes To 31: Comparing This Volatility With Previous Major Events

India VIX is a volatility index, It is the expected annual volatility in the market over the next 30 days, The India Vix was introduced in 2008, It is an index that represents the expected annual volatility for benchmark indexes like NIFTY 50 over the next 30 days, It is based on the NIFTY 50 option contracts for the next 30 days, This index represents the level of fear and risk in the market, Therefore it is also called as the fear index. The more the India VIX, the more the volatility in the market.

Reading of India VIX

Let’s take a scenario where India VIX is at 30% and NIFTY 50 closed at Rs.20,000, This data means that on the basis of NIFTY 50 option contracts for the next 30 days, the estimated volatility is 18% both upside and downside levels, Hence, the calculations are that the annual downside would be at 20,000-(30%* 20,000) = 14,000 and the upside levels to watch for would be at 20,000+(30%*20,000)=26,000. So markets are expecting a range of 14,000-26,000 for the Index NIFTY 50.

India Vix Reaches at new record levels

After the surprising results of the seven-phased general elections, the volatility index, India Vix went as high as 31. The volatility index is up by more than 60% in the past month and 82% this year. 

Comparison with previous events

The India Vix which measures volatility over the next 30 days touched a high of 39.30 during the 2014 Lok Sabha Elections whereas it touched nearly the mark of 30 in the 2019 Elections. In the 2008 crash, the Vix reached at level of 92 whereas during the 2020 Covid crash, it went up to 86.63.

Conclusion: The surge in India’s VIX to 31 is a clear indication of the market’s heightened anxiety and uncertainty surrounding the general election results. This also led to fall of more than 5% in the benchmark index NIFTY 50.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.