The volatility gauge index, India VIX, has surged more than 22% in the last five trading sessions and hit a seven- month high of 16.06 intraday on Tuesday during the NSE’s monthly derivatives contract expiry day. This comes after it fell to around 8, close to its all-time low level, on January 1, since then it has seen a sharp rally of 57.23%.
The index closed at 14.45 level on Tuesday.
A report by Anand Rathi said a move above 12.5 – 13.0 would signal the beginning of volatility expansion and is often accompanied by wider index ranges and faster price movements while the 15-16 zone represents a clear shift in volatility regime, historically associated with sharp directional moves in indices and elevated option premiums.
Potential Index Breakout
“A sustained move in India VIX above 13–14 could push benchmark indices out of consolidation into a directional or high-range phase,” it said and added that over the past several weeks, India VIX has remained compressed, even as price action in benchmark indices has turned increasingly range-bound.
“This combination of low volatility and sideways price movement often precedes a volatility expansion phase, rather than a continuation of calm,” it said.
In January so far, benchmark indices Nifty 50 and Sensex have fallen around 4%. On Tuesday, the Nifty 50 closed at 25,175.40 and the most active January contracts in terms of open interest were call options of 25,150-25,200 levels and put options of 25,000 and 25,100 levels.
Aakash Shah, technical research analyst at Choice Equity Broking Private Limited, also said that India VIX staying higher, suggests expectations of continued intraday swings.
He added that while the overall sentiment has improved modestly, but consolidation is likely to persist as market participants track Q4 earnings, FII flow trends, global developments, and key technical levels.
Expected Trading Range
Nilesh Jain, head of technical and derivatives research at Centrum Broking said that while the index cooled off sharply from its intraday highs of 16, but it remains in an uptrend, which continues to be a concern. “We expect Nifty to oscillate within the broader range of 25,000–25,400 levels,” he added.
Anand Rathi’s report said, “Past patterns indicate that VIX typically moves ahead of events, not after them.”
It sees heightened volatility as earnings-related surprises at the stock level can aggregate into index-level volatility, particularly in heavyweight sectors and historical data shows that India VIX tends to rise 3–4 weeks ahead of the Budget, as participants adjust positions in anticipation of policy outcomes rather than reacting on the event day itself.