Volatility index sees sharp fall as DIIs cushion FPI selloff

In signs of potential calmness in India’s stock market, the domestic equity volatility index, India Vix, is trading near a record closing low.

- SAI ARAVINDH

On Friday, the index ended at its lowest ever closing of 10.12, but rose to 10.68 levels on Monday in intra-day deals. Analysts attribute these low levels to the absence of any immediate key triggers for the markets.

The volatility gauge measures the market’s expectation of future volatility based on Nifty50 index options contracts. It typically rises when market volatility is expected to increase, indicating higher uncertainty or risk in the near future.

The Vix has fallen beyond the record closing level on an intra-day basis. On May 25, 2023, India Vix fell to the lowest level of 8.18.

“The decline in Vix signals that investors are factoring in India's supportive macros — robust July PMI readings, cooling inflation, and resilient domestic flows,” said Harshal Dasani, business head, INVasset PMS.