Can INDIA VIX be a Leading Indicator for NIFTY ?
1. India VIX is the volatility index of Indian stock market, which depicts the expected market volatility over the next 30 calendar days. i.e. higher the India VIX values, higher the expected volatility and vice-versa.
2. It is computed using the best bid and ask quotes of the out-of-the-money near and mid-month NIFTY option contracts.
3. The variance for the near and mid month expiry computed separately are interpolated to get a single variance value with a constant maturity of 30 days to expiration. The square root of the computed variance value is multiplied by 100 to arrive at the India VIX value.
4. VIX can be used to measure sentiment while making investment decisions. It reflects market participants’ greed and fear and is often referred to as ‘Fear Gauge’ or ‘Fear Index’.
5. The correlation between Indian VIX and the benchmark NIFTY50 is typically negative.
6. This is because when there is more uncertainty in future, market participant’s starts fearing and the market enters in to bearish mode.
7. We would always find VIX at low levels when the index is at its high point and VIX at high levels when the markets are trying to find a bottom.
2. It is computed using the best bid and ask quotes of the out-of-the-money near and mid-month NIFTY option contracts.
3. The variance for the near and mid month expiry computed separately are interpolated to get a single variance value with a constant maturity of 30 days to expiration. The square root of the computed variance value is multiplied by 100 to arrive at the India VIX value.
4. VIX can be used to measure sentiment while making investment decisions. It reflects market participants’ greed and fear and is often referred to as ‘Fear Gauge’ or ‘Fear Index’.
5. The correlation between Indian VIX and the benchmark NIFTY50 is typically negative.
6. This is because when there is more uncertainty in future, market participant’s starts fearing and the market enters in to bearish mode.
7. We would always find VIX at low levels when the index is at its high point and VIX at high levels when the markets are trying to find a bottom.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.