Fear index gains 13.9%,indicates risk of sharp swings

On Monday,as the market rose to a new two-and-a-half year high,the fear index,as India VIX is popularly known,gained 13.9% to close at 18.14. This indicates the risk of sharp swings is minimal for the next 30 calendar days. In the same period last year,the index was somewhere around 30 levels.

The index has largely fluctuated between the 20 and 30 levels for most of this year in some ways mirroring the rangebound movement of the benchmark indices. In March and April this year,the index went below the 20 mark but started surging again in May. It hit the year’s high of 34.5 on May 25 before retreating again in June and July. This year the index has closed below the 18 mark 31 times.

Market participants say that the fear factor has been largely absent for quite some time now because of the absence of negative news,either global or local. There has also been no directional movement,and it’s only in the past few weeks that the market has been able to sustain its rise.

India VIX had touched its peak of 85.13 on November 17,2008,soon after the collapse of the Lehman Brothers. India VIX,a volatility index based on the Nifty 50 index option prices and expressed in percentage terms,has been hovering at low levels for quite some time now.