India volatility index, VIX, spikes ahead of Lok Sabha election results; here's why and what it means

The India VIX or volatility index is seeing massive spikes ahead of the Lok Sabha election results. The VIX hit a 52-week high, hitting the 17.56 mark on Tuesday. That's up about 70% from a low of 10, which it touched in April.

Volatility Index

The VIX is the index that gauges the extent of anticipated volatility in the market which also indicates investor sentiment. A higher VIX indicates increasing volatility due to uncertainty and investor fear while a lower VIX indicates a stable period and positive investor sentiment.

Analysts cited by Business Standard say that this volatility is attributed to nervousness ahead of the outcome of Lok Sabha elections and expect the VIX to continue its upward movement in the run up to June 4th, when the results will be declared.

“The rise aligns with historical trends, as the VIX typically climbs before major events like general elections,” Santosh Meena, Head of Research at Swastika Investmart, told Financial express. The historical data shows that the index has seen a jump of 150% during 2019 and over 200% in 2014, which means there is a likelihood of a further rise in the VIX.

Attributing experts, a Moneycontrol reports says there is no need for panic but they recommend reducing highly leveraged positions and utilising hedges to manage volatility effectively. The Moneycontrol report also quotes Avdhut Bagkar, Derivatives and Technical Analyst at StoxBox who says that a further rise in the VIX index may trigger short-term bearishness.

Also watch: RBI, Centre step up liquidity infusions amid 6-week long general assembly elections