India VIX records 2nd highest monthly jump before election results

economictimes.indiatimes.com:

Despite recognizing the importance of tracking the India VIX, many people struggle to understand what an India VIX value of 24 actually means. If the current India VIX reading is 24, it indicates that the Nifty 50 is expected to fluctuate within a 24% range, either up or down, over a year.

To calculate the monthly range, divide the yearly range by the square root of 12 (the number of months in a year), which results in approximately 6.93%. This means the monthly range for the India VIX is 6.93% up or down. Similarly, we can calculate the expected weekly and daily fluctuation ranges for the Nifty 50.

The below table shows the expected fluctuation range for the Nifty 50 when the India VIX is 24.

Understanding the relationship between the India VIX and various sectoral indices is crucial for investors. By examining how different sectors perform during periods of high volatility, investors can make more informed decisions, and manage risks effectively.

The following chart shows that India's VIX has surged by over 30% in a month 12 times in the last 10 years.



The data below presents the average volatility, average returns, average 1-week forward returns, and average 2-week forward returns for various sectoral indices when the India VIX has surged by more than 30% in a single month from April 01, 2013 to May 31, 2024.

Average 1 Week & 2 Week Forward % Returns after a 30% Spike in India VIX