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The market is bracing itself for more volatile sessions in days to come following US Federal Reserve's decision to phase out economic stimulus and weak data emanating out of China.
The India VIX index, NSE's gauge for implied volatility, today touched 19.33%, up 14 basis points from previous day's close. The gauge is at its highest level since June 28, 2012. India VIX has shot up over 10% this week.
Experts said that high VIX signals that the market can move sharply in either directions.
Not just domestically, even in US too the volatility has shot up. As per Bloomberg data, the Chicago Board Options Exchange Volatility Index, a measure of contracts on the Standard & Poor’s 500 index, has risen more than 20%. Both the emerging-markets and gold volatility indices have increased over 30% each.
“We had seen rise in implied volatilities in past couple of days on the back of uncertainty on the direction of market ahead of RBI meeting and then FOMC meeting,” said Yogesh Radke, head (quantitative research) at Edelweiss Financial Securities.
Siddharth Bhamre, head, equity derivatives, Angel Broking said it won't be surprising if implied volatility crosses 20% following the sharp correction we saw in the market on Thursday.
The benchmark Nifty fell 2.86%, or 166.35 points, to end at 5,655.90 after the US Fed signalled tapering its bond buying programme. It was highest percentage fall on the Nifty since September 2011.
Most Asian markets today hit fresh 9-1/2-month lows.
