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India VIX Increasing by 22% in a Single day is Not Good


This is INDIA VIX on 31-Aug-20 at 1.19 pm (Source: https://www.google.com/search?q=india+vix):

INDIA VIX 31-Aug-20
INDIA VIX 31-Aug-20

This is NSE on 31-Aug-20 at 1.24 pm Source: https://money.rediff.com/index.html:

NSE 31-AUG-20

Can you see that both are inversely proportional?

Check out this post where I had also given a caution of India VIX surging and NSE falling.

What can you make out from a surging India VIX?

That when India VIX surges NSE will fall and vice versa.

How can this help the directional traders?

Well, this will not help 100% of the times, but if from 11 to 11.45 am you see that India VIX is surging then you can short Nifty futures and if from 11 to 11.45 am you see that India VIX is filling then you can buy Nifty futures. However, this trading must be done Intraday only. Next day the situation can change and you may see the position reversing.

Why India VIX Surges?

India VIX (Volatility Index) is a measure of PANIC in Indian markets or the environment. This could be due to some business news like good results/bad results/RBI policy/Budget etc and political news like it happened today (31-Aug-20).

Here is what happened today that spoofed the markets and India VIX surged:

Intrusion by Chinese troops in Eastern Ladakh gave enough ammunition to stock market bears to push domestic indices sharply lower on Monday, wiping off all morning gains. A general profit booking also weighed on the indices, analysts said.

Source: https://economictimes.indiatimes.com/markets/stocks/news/sensex-plunges-900-points-from-days-high-what-triggered-this-sudden-crash/articleshow/77847411.cms?

As I am writing this article at 1.47 pm Sensex is down by almost 700 points. This is the reason why India VIX is a very important factor to look at before taking a trade especially if its a directional trade.

Full-time traders like me, have time to read news and then take a decision to go long or short for the day if they decide to do Intraday trade, however people who have a job or are busy may not find the time to read the news. So for them, India VIX gives a good indication to take a trading decision.

However, for non-directional trades India VIX is not that important measure as either way they make money in 75% of the trades. My course strategies are mainly non-directional trading only. A non-directional trader may not look at India VIX if he/she decides to take a trade, however its a very important indicator for a directional trader.

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{ 1 comment… add one }
  • Shyam August 31, 2020, 8:32 pm

    Thanks, Sir detailed explanation

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