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India’s market volatility sees the sharpest fall in five years
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
The India VIX serves as a crucial metric, gauging market expectations regarding volatility in the near term. Volatility, often dubbed the “fear index,” encapsulates the speed and extent of price fluctuations within financial markets. The recent plunge in India VIX can be attributed to several factors, prominently among them being the de-escalation of war tensions and the unfolding electoral landscape aligning favourably with the incumbent BJP government.
The India Volatility Index (VIX) has witnessed its most pronounced decline in half a decade. The last time such a substantial drop occurred coincided with counting day, marking a trend worth noting for market observers.
The India VIX serves as a crucial metric, gauging market expectations regarding volatility in the near term. Volatility, often dubbed the “fear index,” encapsulates the speed and extent of price fluctuations within financial markets.
The recent plunge in India VIX can be attributed to several factors, prominent among them being the de-escalation of war tensions and the unfolding electoral landscape aligning favourably with the incumbent BJP government. Essentially, the market seems to be signalling a period of relative calm, devoid of imminent disruptions.
Analysts interpret these developments as indicative of an impending market breakout following a prolonged four-month consolidation phase. However, amidst this optimism lurks a potential concern: complacency. The absence of perceived threats might inadvertently breed a sense of overconfidence among investors, necessitating cautious navigation of market waters.
Delving into options data sheds further light on the market sentiment. A notable strategy in play is the short straddle positioned at 22,400, with a cumulative premium of 200. This suggests a projected near-term trading range spanning from 22,200 to 22,600.
On Tuesday, the Nifty50 index exhibited a subdued performance, hovering marginally above the flatline with gains of 0.14%, closing at 22,368. Over a span of six months, the Nifty50 index has yielded returns of approximately 16%, underscoring its resilience amid evolving market dynamics.
As investors navigate through this period of subdued volatility, all eyes remain fixated on unfolding geopolitical developments and electoral outcomes, poised to shape the trajectory of Indian markets in the days to come.
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