India VIX , the volatility index of Indian equities, measures the market's expected volatility for the near term. Analysts and investors look at this gauge 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’.
The correlation between Indian VIX and benchmark Nifty50 is typically negative. One would always find VIX at its low level when the index is at its high point, and the VIX a ..
The chart above shows the weekly performance of Nifty50 plotted against the VIX. The last section of the chart shows the correlation between Nifty and VIX. It is evident that most of the times over the past decade, Nifty has typically enjoyed a strong negative correlation with VIX, which is quite normal.
But over the past couple of weeks, this historical negative correlation has gone awry. It has been thrown off-balance, as both Nifty and VIX have started rising together over the past ..
Excluding the current occurrence, as it has not concluded yet, if one were to examine the past four such instances, it was only once in 2014 that both Nifty and VIX rose together. The VIX came down sharply when volatility decreased but stocks continued to inch higher.
In the remaining three occurrences – in 2010, 2014-15 and in 2017-18 – both Nifty and VIX rose together. But when VIX declined and volatility reduced, it also brought the index down along with it and the market saw correct ..
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