Foreign and domestic investors have pressed a panic button in the wake of rupee touching an all-time low of 58.95 on Tuesday. The weakness in rupee has led to a sharp fall in equities with key benchmark indices losing over 6 percent in the last eleven sessions.
Volatility Index or the fear gauge indicator is a measure of the amount by which an underlying Index is expected to fluctuate in the near-term. India VIX, a volatility index based on the Nifty index Option prices has been making higher lows and higher highs in last one month. The India VIX has touched a high of 19.85 today, a level last seen in June, 2012. As seen from the chart, India VIX is inversely proportional correlated to the Nifty.
Sanju Verma of Violet Arch Cap told CNBC-TV18, "The lower end of the India VIX has been trading in the region of 13-14, and the higher end has been trading in a band of 18-20. That is a cause of concern. If the India VIX were to breach 20 on the upside, in the intermediate to short-term there could be more trouble."
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