VIX shows market betting on 600-pt Nifty swing on May 16

The India Volatility Index (VIX) has gained 28 percent in the last four sessions. Normally, this would have meant the market had declined during this period. That is because the movements in VIX and the market are inversely co-related, more often than not. But this time around, the Nifty has risen alongside VIX, gaining 3 percent in the last four sessions.

So what’s happening here?

The most obvious explanation is the fact that the market is looking at May 16 Lok Sabha election results as a binary event –  Narendra Modi coming to power thumbing Victory which can move the Nifty by 600 points or more. And traders are either taking guard, or trying to ride the swing with minimum risk.

The biggest example of this was the rise in

Continue Reading