InvestorQ : Can I gauge the market movements based on the VIX?
manisha Kolvenkar made post

Can I gauge the market movements based on the VIX?

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Arusha Ray answered.
3 years ago
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VIX has been a fairly reliable gauge of the market mood across world markets and India has been no exception. A better understanding of the underlying methodology of the VIX and its interpretation goes a long way in putting the gauge to better use.

High VIX means high levels of fear and that is negative for the market. That is why markets rarely go up when VIX is above the 22 level. Low levels of VIX are more conducive to the market. At least they are an assurance that corrections will not be too steep. Generally, the relationship between the VIX and the market index has been negative globally and India has exhibited similar trends in the last few years. A rising market is normally accompanied by falling VIX and a falling market is normally accompanied by a rising VIX. There are the some key take-aways…

When the Nifty has been on a long term uptrend as we saw between Feb 2016 and January 2018, the Nifty has typically been at subdued levels of 10-13. In such cases, the intermittent corrections in the Nifty have been marked by sudden spikes in the VIX index.

Sharp spike in VIX often acts as a lead indicator of a likely correction in the market whereas a tepid VIX is an indication that any correction will be limited. Under normal market conditions the historical trend line of the VIX works quite effectively and can be bought or sold into within this range to get the best results in trading.

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Purvesh answered.
3 years ago
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Yes, you can go ahead with the same.

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