Volatility index India VIX surges once again; what does it mean for investors?

NSE's India VIX index, also known as the volatility gauge in market parlance, skyrocketed as much as 16.4 per cent to 21.49 during Monday's session, the latest in a series of sessions seeing its wild upswing. Several market analysts attribute the rise in the index to the outcome of the ongoing 2024 general elections.

What does the rise in India VIX index mean for investors? Here's what analysts say

"This is a general phenomenon before elections. Even in 2019 and 2014 the VIX went up till  30 – 39," said Mehul Kothari, DVP - Technical Research, Anand Rathi Shares and Stock Brokers.

Kothari added this time the nervousness in the market is due to some lack of confidence with regards to the number of seats of the ruling party. 

Along similar lines, Anand James, Chief Market Strategist, Geojit Financial Services said, "VIX’s behaviour now has a lot of similarities to the period shortly before the 2019 electoral results announcement. Then too, markets had come off peaks in March, and VIX shot up to 28.6."  

Further, expressing concerns, James said that VIX was in a 20-14 range during the previous six months, pointing to volatility expectations being reasonably high for an extended period. 

Geojit's James reckons a cool-off before the electoral results. 

"In stark contrast, VIX’s rise from record lows to above 20 now, has unfolded in just a fortnight. So, while recent history points to more room for upside in VIX and thereby volatility, the abruptness in the rate of change of VIX, may lead to a cool-off, perhaps even before the electoral results," said James. 

Anand Rathi's Kothari believes that the rise of VIX can be a great opportunity to deploy longs once there is a price correction.

"Based on the past performance, at this juncture too, the index has corrected almost 4.2 per cent from the top and that could be a lucrative occasion to add some oversold stocks," said Kothari.

What is the India VIX index? 

India VIX was first introduced by the NSE in the year 2003. It calculates the volatility of the market. The index rises when the market fluctuates and goes up and down. Similarly, when the market is more stable and less volatile, the volatility index falls. 

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