India VIX has largely stayed above the 20-mark for five back-to-back weeks in a row, as investors globally worry about worsening inflation and its impact on global growth, and persisting supply-chain issues owing to lockdowns in key regions in China. On Tuesday, the VIX — known in market parlance as the fear index — rose 1.1 percent to settle at 20.4.

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The index gauges the expectation of volatility in the market going forward.

So far in 2022, the VIX has risen more than 25 percent.

During lesser volatile periods, the VIX usually ranges between 15 and 17, and goes as low as 12-13 during periods of calm.

"In theory, a higher VIX denotes higher volatility expectations but statistics conceal more than they reveal. If the VIX above 20 has historically been a rare event, we have seen such levels at least five times since November 2021, suggesting that we may have systematically moved into a high VIX regime," Anand James, Chief Market Strategist at Geojit Financial Services, told CNBCTV18.com.

"VIX is calculated using the order book of Nifty options and it is only natural see such a shift, especially given the continued rise of retail participation in the index's options, which is more responsive to short term events," he said.

Despite the recent surge, the VIX is nowhere near the highs seen during the times of crises. For instance, it had soared to as high as 87 in March 2020, when India first imposed a full lockdown to curb the spread of the COVID pandemic. The highest ever reading of the India VIX hit was recorded during the 2008 Global Financial Crisis, when it climbed to 92.5 on November 14, 2008.

Ahead of big events and during periods of turbulence, the India VIX sees sharp swings like its US counterpart, CBOE VIX. The Union Budget or election results or more recently, the Russia-Ukraine war and aggressive moves by the Fed have increased volatility in the market.

Traders who write options contract on the index and specific stocks particularly track this index closely to gauge fear levels in the system as it helps in assessing a premium — a higher premium in times of volatility and vice versa.

Meanwhile, benchmark indcies fell more than one percent on Tuesday, as investors awaited the RBI to reveal what's in store for the money market, at a time when elevated consumer prices are threatening economic growth.

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