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What is India VIX?
India VIX is the National Stock Exchange's volatility index, computed in real time from the order-book of Nifty 50 index options. It reflects the market's collective expectation of Nifty's annualised volatility over the next 30 calendar days. Launched by NSE in 2008, it is popularly called India's "fear gauge".
Calculation Methodology (NSE)
India VIX adopts the same methodology as the CBOE VIX (US S&P 500 volatility index), licensed from CBOE in 2007. Key steps:
- Use near-month and next-month Nifty options (when near-month has 7+ days to expiry)
- Pick all out-of-the-money calls and puts with non-zero best bid-ask
- For each strike, take the midpoint of bid and ask
- Weight by inverse of strike-squared and risk-free rate (FBIL MIBOR)
- Time-weighted interpolation between near and next month gives the 30-day estimate
- Result is annualised standard deviation, expressed as a percentage
How to Interpret
- 10-15 — calm market, complacency zone; often precedes corrections
- 15-22 — normal volatility regime
- 22-30 — elevated nervousness; typical mid-correction reading
- 30+ — panic; usually marks bottoms (March 2020 hit 86, December 2008 hit 90+)
A reading of 20 implies the market expects Nifty to move within +/-20%/sqrt(12) = +/-5.8% (one standard deviation) over the next month — roughly +/-1.3% per week.
India VIX as a Trading and Hedging Tool
- Inverse correlation with Nifty — VIX rises sharply when Nifty falls (panic), falls slowly when Nifty rises (greed)
- Mean-reverting — extreme readings rarely persist; useful for tactical re-entry timing
- NSE launched India VIX futures in 2014 (currently illiquid); the cash index itself cannot be directly traded
- Combine VIX level with historical realised volatility — when implied (VIX) sharply exceeds realised, options are expensive
SEBI / NSE Caveat
India VIX is an indicator, not a prediction. A high reading does not mean Nifty will move sharply — only that the market is pricing in the possibility. It is one input among many; never trade on VIX alone.
Educational only — not advice. ARN-314872.