The India VIX (Volatility Index) surged over 21 percent to 27.8 on Friday, indicating nervousness among investors, following an over 2 percent fall in benchmark indices amid global sell-off. This is the highest level of India VIX in 2021.

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VIX is meant to indicate investors’ perception of the annual market volatility over the next 30 calendar days. The higher the value, the higher is the expected volatility and vice versa.

The indices witnessed heavy selloff following steep losses in Asian peers as a rout in global bond markets sent yields flying and spooked investors.

At the global level, US Treasury yields vaulted to their highest in over a year at 1.6 percent on expectations of a strong economic expansion and related inflation. Back home, the 10-year government bond yield jumped to 6.18 percent on Thursday, February 25.

The Sensex fell over 1,500 points while the Nifty50 index was trading below 14,700, down over 3 percent each. Broader markets, however, outperformed benchmarks with the midcap and smallcap indcies down below 1 percent.

"We are now in a see-sawing market moving up & down in response to positive & negative news. But the long-term texture of the market has been ' buy on dips' and this strategy has been rewarding in this bull run. The sell-off in the US market yesterday was the market's response to 10-year yield touching 1.6 percent. The Fed's interpretation of the rising yield is that it is discounting better growth prospects while the market typically discounts stock prices at a lower PE when interest rates rise. Fed's declared commitment to inject liquidity and keep rates low through 2023 can ensure a buoyant market this year. So investors can utilize opportunities thrown up by corrections to buy quality stocks is performing sectors," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Last year in March when the Sensex and Nifty had crashed to multi-year lows, the VIX had surged as high as 86. The highest India VIX has hit was during the Global Financial Crisis of 2008, where it climbed to 92.53 on November 14, 2008.

(Edited by : Ajay Vaishnav)

First Published:Feb 26, 2021 11:46 AM IST