Dalal Street continued to see bouts of volatility on Tuesday as benchmark indices registered new all-time highs despite mixed sentiments in global markets. Volatility gauge India VIX surged the most in nearly two months, minutes after the 50-scrip index Nifty50 touched the 17,000 mark for the first time ever — a level many traders had eagerly waited for.
NSE's India VIX index — which gauges the expectation of volatility in the market in the near term — rose 9.02 percent to end at 14.52, marking its biggest single-day gain since July 8. During the session, it jumped as much as 10.89 percent to 14.77.
Analysts say more volatility cannot be ruled out in the near term given the pace of the recent surge.
"From June 28, the India VIX index is moving within a range on the daily charts and has been volatile between 11.50 and 14 on the upside. It looks like the volatility index is going to break the upper range and will move above that range, signalling more volatility in the coming days," Rahul Sharma, Co-Founder of Equity99, told CNBCTV18.com.
The India VIX index is rising despite the market rallying, which is rare. Typically, it eases when the market strengthens.
Santosh Meena, Head of Research at Swastika Investmart, said the rise in VIX will help option buyers in the near term.
"Currently, two forces are acting in support of India VIX: first, call writers are on the back foot and covering their shorts in panic, and second, some hedging by institutional investors by buying put options as the market is a little overbought in the short term," he told CNBCTV18.com.
Technically, the India VIX index is bouncing back from major support at 11-10 levels, he said. "There is limited downside and a bounceback towards 17 can be expected if there is any small correction in the market," Meena added.
(Edited by : Ajay Vaishnav)
First Published: Aug 31, 2021 12:29 PM IST
