India Vix measures expected risk in the Indian Stock Market, calculated by how much an index will fluctuate based on underlying index options' order book.
The index uses NIFTY Options contracts to forecast market volatility over the next 30 days. This is done through the Black-Scholes model and is expressed in percentage terms.
Benefits of India VIX:
1. Risk Management: Serves as a reliable indicator of market risk.
2. Insight: Provides a good understanding of market sentiment.
3. Long-term investment: Helps long-term investors manage volatility.
4. Options Trading: Aids options traders in making decisions.
5. Trading Decisions: Assists in making informed trading decisions.
6. Market Trends: Helps predict market trends.
7. Portfolio Management: Useful for mutual fund managers and portfolio managers.
Importance of NIFTY VIX:
The VIX assists investors in making forecasts and building trading strategies. This is because price volatility greatly impacts trading performance.
When the India VIX index rises, it signifies high levels of volatility and significant change in the NIFTY index. Conversely, a low value indicates little change.
India VIX helps investors manage risk, make trading decisions, forecast market trends, and understand market sentiment, enabling them to make informed decisions and maximize returns.