India VIX surges most in 2 yrs as Sensex, Nifty slump

More than 50 per cent jump in the volatility index India VIX, the most in two years, on Tuesday to above 23-level has stunned domestic investors. NSE’s India VIX index shot 51.8 per cent to an intra-day high of 23.15 from the previous close at 15.25 and finally closed at 20.01.

The volatility index typically has an inverse correlation with rising markets. The current rise in the volatility index suggests that investors are losing confidence or that the correction in benchmark indices is imminent. Indices climbed to record level late last month ahead of Union budget, which was expected to take populist measure being prime minister Narendra Modi led government’s last opportunity before general election 2019. While the budget proposals were seen more as supporting of growth but delaying fiscal consolidations, it provided little cheers.

There was no place to hide as fear gripped entire market, with 2,262 scrips on BSE declining compared to only 498 scrips advancing.

Sneha Seth, derivative analyst, Angel Broking, said, “The benchmark index crashed further in the opening mainly due to the weakness seen across the globe. The volatility index surged above 20; now if we see India VIX surging further above 23-24, it shall not be an encouraging sign for the bulls. Foreign portfolio investors (FPIs) too have been unwinding their longs and they also added fresh short positions in index futures; resulting their ‘long -short ratio’ declining from 80 per cent to 63 per cent.”

Amar Pandit, chartered financial analyst said, “The volatility in the market today is primarily because of the rise in bond yield in the US. This led to a lot of foreign institutional investors to pull out money from emerging economies like India.”

— With inputs from TickerNews Service