India VIX (Volatility Index) in a index to measure the implied volatility of Nifty 50 Index Option prices over the next 30 day period. The index reflects the investor's sentiment and is a helpful indicator of the amount of fluctuation that markets might witness in near term. Higher the implied volatility, higher the India VIX value and vice-versa.
Volatility is often described as the "rate and magnitude of changes in prices" and in finance often referred to as risk.
How to interpret VIX?
The VIX is quoted in terms of percentage points and translates, roughly, to the expected movement in the Nifty 50 Index over the next 30-day period, on an annualized basis.
For example, if the VIX is at 18 then one can infer that the index option markets expect the Nifty 50 to move up or down by:
[15 % / Square root (12 months)] = 5.19 %
over the next 30-day period. That is, if, for example, the Nifty 50 is currently at 5000, then the estimated 30-day change in the Nifty 50 will be within 260 points up or down.
Use the following link to download the NSE white paper on VIX: Implied Volatility PDF
Use the following link to download the NSE white paper on VIX: Implied Volatility PDF
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