Volatility Index (VIX), often called the “Fear Gauge,” measures the market’s expectations of volatility over the near term. In India, the India VIX is derived from the NIFTY 50 index options and indicates how much traders expect the benchmark index to fluctuate in the next 30 days. A higher VIX value signifies greater uncertainty or expected volatility, while a lower VIX suggests market stability and investor confidence.

The India VIX is calculated using the order book of NIFTY options, factoring in both call and put prices across multiple strike prices. It represents the annualized percentage of expected volatility. For example, if the India VIX is 14, the market expects the NIFTY 50 to move up or down by 14% over the next year (on an annualized basis). However, it does not predict market direction — only the degree of fluctuation.

Traders and investors use the VIX as a tool to assess market sentiment. A rising VIX often reflects growing fear or risk aversion, typically seen during uncertain or bearish phases. Conversely, a falling VIX indicates calmness and confidence among market participants. It helps portfolio managers plan hedging strategies and risk management during volatile periods.

While the VIX can be a valuable indicator, it should not be viewed in isolation. Combining VIX data with technical and fundamental analysis offers a more holistic view of market conditions. Understanding VIX trends enables investors to make informed decisions, manage exposure, and align investment strategies with their risk tolerance. As per SEBI guidelines, VIX should be interpreted purely for educational and analytical purposes, not as a direct trading recommendation.