Get a comprehensive guide to India VIX today and understand the Indian stock market better

Last Updated : Aug. 8, 2023, 12:45 p.m.

Volatility is an indicator of how much the price of an asset fluctuates over time. It reflects how uncertain and risky the market is. Investors and traders must keep track of a market’s volatility to make informed and profitable decisions. One of the most widely used volatility indicators in the Indian stock market is the India VIX. It can help traders and investors understand how the market behaves and how risky it can be. But using the India VIX today is not simple. It requires complex computational methods. This guide is to help readers understand the complex calculations related to the India VIX today simply and concisely.

What is the India VIX?

The India VIX is a volatility index calculated by the National Stock Exchange (NSE). The NSE calculates it using the best bid-ask quotes of out-of-the-money near and mid-month NIFTY options contracts.

India VIX chart today represents expectations of the market’s volatility over the next thirty calendar days.

India VIX today can give a quick and easy overview of the current and historical levels of volatility in the Indian stock market. A high India VIX value indicates a high level of fear, uncertainty, and risk in the market. A low India VIX value indicates less fear, uncertainty, and risk in the market.

Understanding Volatility and How It Affects the Market

Volatility refers to how much the market price fluctuates. It reflects the degree of risk and uncertainty in the market. High volatility in the market represents higher price fluctuations. On the other hand, low volatility in the market denotes lower price fluctuations.

There are various ways to calculate volatility in the market, such as historical volatility, implied volatility, or realised volatility. However, one of the most popular and widely used volatility indicators in the Indian stock market is the India VIX chart today.

Factors Affecting Volatility

Here are a few factors that affect the volatility of the market:

Influence of the market conditions within the country.
Global economy and its influence on the country’s market.
Role of investor sentiments and market performance in the past.

How to Compute the India VIX from NIFTY Options

The India VIX employs the Chicago Board Options Exchange’s (CBOE) computational method, with minor modifications to accommodate the NIFTY options order book. India VIX today uses the best bid-ask quotes of out-of-the-money near and mid-month NIFTY options contracts traded on the Futures and Options (F&O) segment of the National Stock Exchange (NSE).

To compute the India VIX today, follow the given steps:

Calculate the time to expiry in minutes for each option contract:

Calculate the forward index level for each expiry month using the NIFTY future contract’s most recent available price.
Identify the at-the-money (ATM) strike price for each expiry month, as the strike price is slightly below the forward index level.
Select the out-of-the-money call and put options with strike prices, respectively, higher and lower than the ATM strike price.
Use interpolation to estimate the values for strikes that do not have relevant quotes using a statistical technique called a natural cubic spline.
Calculate each expiry month’s variance (volatility squared) using the selected option quotes, the forward index level, and the risk-free interest rate.
Calculate the weighted average of the variances for near and mid-month expiry using a 30-day time horizon.
Calculate the square root of the weighted average variance and multiply it by 100 to get the India VIX value as an annualised percentage.

India VIX today displays the current and historical values of India VIX. The India VIX represents the market’s anticipated volatility for the upcoming 30 calendar days.

Factors Affecting India VIX Movements

Some of the factors that affect India VIX movements are as follows:

Market Sentiment

The market participants’ moods and sentiments affect their volatility expectations. Fear, uncertainty, and pessimism lead to an increase in the India VIX, while confidence, stability, and optimism lead to a decrease.

Market Events

The occurrence or anticipation of significant events that can affect the market’s performance, such as elections, policy changes, earnings announcements, geopolitical tensions, natural disasters, etc., can cause the India VIX to spike or drop.

Market Trends

The market trends’ direction and strength can also affect India VIX. A strong uptrend or downtrend can reduce the India VIX, while a sideways or choppy market can increase it.

Market Application of India VIX

India VIX today has many market applications. Some of these applications are as follows:

India VIX can help investors and traders to measure and manage market volatility and risk. It can also provide opportunities for volatility trading and hedging.
Volatility trading involves taking positions based on the expected market’s volatility, regardless of the direction of the price movement. Investors and traders can use India VIX futures and options contracts to trade volatility directly or use other derivatives, such as NIFTY options, to create volatility strategies.
Hedging involves taking positions to reduce or offset the risk of an existing portfolio or work. Investors and traders can use India VIX futures and options contracts to hedge against the market volatility risk or use other derivatives, such as NIFTY options, to create hedging strategies.
The India VIX today can help investors and traders identify the current and historical levels of volatility and decide their trading and hedging strategies accordingly. A high India VIX value implies high expected volatility, which may indicate a bearish or uncertain market. In contrast, a low India VIX value indicates low expected volatility, which may show a bullish or stable market.

Conclusion

India VIX today is an essential indicator that tells about the market’s stability. It reflects the market’s volatility expectations over the next 30 calendar days based on the NIFTY options contracts. India VIX today can help investors keep track of the market’s certainty and reliability to leverage opportunities for volatility trading and hedging. So, understanding how it works is important for investors and traders, which is what this guide tries to do.

FAQs

1. What do you mean by India VIX?

India VIX is an indicator developed by the NSE based on the NIFTY options contracts. It reflects the volatility of the Indian stock market to help traders and investors keep track of it and earn as much profit as possible.

2. What does it mean when the value of India VIX is high?

When the value of India’s VIX is high, it indicates that the Indian stock market is more volatile, i.e., subject to more fluctuations. During this, the market price is high and can either rise or fall depending on economic conditions.

3. What does it mean when the value of India VIX is low?

When the value of India’s VIX is low, it indicates that the Indian stock market is stable and less volatile. It implies that the market is subject to fewer fluctuations, and prices will likely stay stable.

4. Where can I find the India VIX data?

You can visit the NSE official website. Below the search bar, you will see many drop-down menus. One of them will be “Resources”. Hover over it, and you will see a drop-down menu. You can find “Historical Report” in the downloads section. Click it, and the link will redirect you to a new page. Go down, and you will see the option “Historical Report – India VIX”. Click it, and there you can check the historical report for India VIX.