Volatility index up 30% post-sell-off

India's volatility index (VIX),a measure of near-term volatility,saw its sharpest rise in 2 years.

India’s volatility index (VIX),a measure of near-term volatility,on Friday saw its sharpest rise in two years spiking over 30 percent after stock markets sank as fresh worries on the health of the global economy prompted investors to cut positions in risky assets.

The volatility index of the National Stock Exchange touched a day high of 26.40,up 30.6 percent from Thursday’s close,in what could be the highest intra-day jump after the Lehman crisis,several analysts said.

Volatility index is actually an index of fear and this clearly shows uncertainty prevailing in the market. Traders are actually confused and were not expecting such a heavy sell-off,said Alex Mathews,head of research at Geojit BNP Paribas Financial Services.

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Indian shares touched their lowest level since June 2010 on Friday,joining a slide in Asian stocks,as fresh worries that the global economy is slipping back towards recession prompted investors to cut positions in risky assets.

At 3.16 p.m,the NSE Index ,which at one point of time fell nearly 4 percent,was trading 2.23 percent lower at 5,212.40 points.

Meanwhile,Europe’s main investor fear gauge hit a 14-month high on increased concerns the U.S. economy could be heading towards another recession and jitters the euro zone debt crisis could spread to Italy and Spain. .

Implied volatility is not cooling off,indicating the current negative trend may continue,said Nandish Patel,derivative analyst at Sharekhan. Its a panic selling and so will be very difficult to predict a good support (for Nifty).

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Asian markets tumbled on Friday after the overnight selloff on Wall Street,on fears the United States is staring at another recession .

There are lot of call writing and put buying in terms of hedging. Overall I expect volatility index to go up and the market to slide to 4,800 if it closes below 5,300 levels,said Nitin Muruka,head-derivative research at SMC Global.

Investors fled Wall Street on Thursday in the worst stock-market selloff since the middle of the financial crisis in early 2009, on fear the United States is staring at another recession and that Europe’s sovereign debt crisis is swallowing two of its largest economies. .

Credit Suisse has cut forecasts for earnings per share (EPS) growth in the U.S. for 2011 and 2012 to 12 percent and 6 percent from 14 percent and 9 percent previously and in the Euro-area to 7 percent and 6 percent from 12 percent and 9 percent respectively on the back of the weaker macro outlook.