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VIX helps predict the overall market volatility expectations over the next 30 days.
India VIX
- India VIX is a volatility index that serves as a measure of market expectation of volatility in the near term.
- Volatility signifies the rate and magnitude of change in the stock price or index value,
- The movement in the VIX index reflects the overall market volatility expectations over the next 30 days.
- A spike in the VIX value means the market is expecting higher volatility in the near future.
- Given the nature of the index, it is also known as ‘fear gauge’ or ‘fear index’.
More about the index
- India VIX index is not the first of its kind in the world.
- The VIX index was first created by the Chicago Board Options Exchange (CBOE) and introduced in 1993 based on the prices of S&P 500 index.
- The India VIX was launched with a similar intent in 2010 and is based on the computation methodology of CBOE though amended to align with the Indian markets.
- India VIX is based on the NIFTY Index Option prices.
- From the best bid-ask prices of NIFTY Options contracts, a volatility figure (%) are calculated which indicates the expected market volatility over the next 30 calendar days.
NIFTY
- The Nifty is the flagship benchmark of the National Stock Exchange (NSE)
- It is a well-diversified index, comprising top 50 companies in terms of free-float market capitalization that are traded on the bourse.
- It is supposed to reflect the health of the listed universe of Indian companies, and hence the broader economy, in all market conditions.
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