BackWhy India VIX surged today despite Nifty crossing 17,000
Sensex today crossed the 57,000 milestone while Nifty surpassed 17,000 as bull run continued in equity market
PremiumIndian benchmark indices continued to surge to record high levels with the 50-stock index Nifty crossing 17,000 milestone whereas Sensex soared to scale the 57,000 mark for the first time on Tuesday as the bull run continues in the equity market on the last day of August, a month that has seen the stock market setting new records.
Meanwhile, India VIX index as known as volatility index surged over 5% despite the benchmark indices scaling to new highs, contrary to how it normally behaves. The VI index is a measure of market's expectation of volatility over the near term.
Santosh Meena, Head of Research, Swastika Investmart said that India VIX is inching higher despite markets rallying as it is not always necessary that when the market goes up then India VIX should fall because VIX rises when there is aggressive buying in options whether the buying in call or put.
“Currently, there are two forces are acting in support of India VIX. First, Call writers are on the back foot and they are covering their shorts in panic while there is some hedging by institutional investors by buying put options as markets are a little overbought in short term," he said.
Volatility Index is a measure, of the amount by which an underlying Index is expected to fluctuate, in the near term, based on the order book of the underlying index options.
Technically, VIX index is bouncing back from the major support area of 11-10 and there is limited downside while a bounceback towards 17 can be expected if there will be any small correction in the market. The rise in VIX will help option buyers in the near term, Meena said.
Investors are also awaiting India's gross domestic product (GDP) data which is set to be released today. A Reuters survey of economists showed that the country's economy likely rebounded in the April-June quarter from a deep slump last year on improved manufacturing.
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