The India VIX, commonly known as the Fear Index, spiked by as much as 15 percent on May 6, reaching 16.58, prompting cautionary advice from experts regarding leveraged positions. This sudden increase marks a sharp rebound from the five-month low of 9.85 recorded on April 23, coinciding with the ongoing election activities, which typically introduce heightened market volatility.
Experts emphasize the importance of maintaining vigilance in the face of rising India VIX levels, recommending a cautious approach towards leveraged positions and advocating the use of hedging strategies to effectively manage volatility. Avdhut Bagkar, a Derivatives and Technical Analyst at StoxBox, warns that a further uptick in the VIX could lead to short-term bearishness, citing an increase in put options as indicative of weakness in the broader market trend.
Sudeep Shah, DVP and Head of technical and derivative research at SBI Securities notes that the current rise in volatility aligns with expectations, given the proximity to election results. Shah predicts that unless the VIX retreats below the 13-13.50 levels, it could potentially climb to 20-22 levels in the coming weeks. However, he cautions against interpreting this increase as a signal for market correction, emphasizing instead the likelihood of intraday volatility and gap openings in subsequent sessions.
In light of these developments, Shah underscores the importance of prudent risk management practices, including proper position sizing, efficient hedging strategies, and maintaining tighter stop losses to mitigate potential losses if market views prove to be inaccurate.
It’s essential for investors to exercise diligence and seek advice from certified experts before making any investment decisions, considering the evolving market dynamics and the potential impact of election-related volatility on financial markets.
