The fear index for Indian markets approached its highest level in six years on Wednesday, despite the fact that the indexes rose by almost 1% during the day. After the loss of part of the daily profit, BSE Sensex ended at 35,697.40, or 62.45 points or 0.18%, while NGE ended at 10,458.40, or 6.95 points or 0.07%. Meanwhile, the Indian Volatility Index (VIX) has risen to 31.55, suggesting that markets fear further turbulence in the coming days.
Markets in other parts of Asia remained under pressure: Japan, China, Hong Kong and Korea fell by 1-3 percent on Monday as the Covida 19 outbreak spread further.
The NSE VIX rose by 170.45% this year and by 30% in March alone. Volatility has increased sharply, mainly due to the decline in global equity markets and falling crude oil prices.
The VIX index is the most widely monitored by traders as a measure of the expected volatility of stock markets over the next 30 days, and is the main means of protecting traders from sharp movements in the shares or their prices.
Graph : Parace Jane/Mint
Investors, analysts and portfolio managers see VIX as a way to measure market risk, fear and stress before making investment decisions.
According to Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services Pvt. Ltd, despite Wednesday’s rally, the market is expected to remain under pressure until the outbreak slows down. However, with this adjustment, bond yields are higher than bond yields, offering attractive entry opportunities in many fundamentally strong companies, he said. In general, an increase in the VIX corresponds to a decrease in shares, as traders and investors use it to hedge their share positions.
Shrikant Chuhan, senior vice president of technical research for equities, Kotak Securities, said volatility is increasing day by day as major global investors panic over the virus outbreak and prefer to invest in safe assets such as U.S. treasury bills and gold.
In the course of the last 11 sessions, foreign institutional investors have started selling Indian shares and reselling them for USD 4.02 billion.
They are net sellers of $408 million in 2020.
So far, domestic institutional investors have invested ₹38 224.36 Crore in Indian equities in 2020.
According to data published by the Association of Mutual Investment Funds of India (Amfi), net inflows into mutual fund systems increased by 112% in February, reaching an 11-month record of 865.49 Crore on ₹10. That’s 36.95% more than the monthly flow in January.
In February, the volume of repayments from MF funds also increased. As part of the investment fund programmes, funds were withdrawn from ₹13 919.19 kronor in February compared to ₹13 440.65 kronor in January.
During the month, the inflow of funds from System Investment Plans (SIPs) decreased slightly. The total amount collected by the SIP in February was ₹8 512,93 Crore, compared to ₹8 531,90 in January.
The SIP makes it possible to periodically invest a fixed amount in an investment fund programme at certain intervals.