Crisil, NSE to develop volatility index

Rating agency Crisil, whose majority is owned by the US-based Standard & Poor's (S&P) Rating Services, and the National Stock Exchange (NSE) will join hands to develop a volatility index for the Indian market.

The Securities and Exchange Board of India (Sebi) last week gave the in-principle go-ahead for derivatives trading on volatility index (VIX).

"We are definitely looking to have a volatility index. Normally, Sebi does not come into the picture as far as creation of an index is concerned. But, now that Sebi has given its in-principle approval for creating such an index, we will be discussing with Crisil to have our own VIX," said Suresh Narayanan, chief executive officer of India Index Services & Products Ltd (IISL), a joint venture between Crisil and NSE.

All equity-linked indices on the NSE are being launched through IISL. Internationally, the popular Chicago Board of Options Exchange Volatility Index (VIX) is the most widely tracked barometer of investor sentiment and market volatility.

It measures the near-term volatility conveyed by S&P 500 stock index options. S&P has a commercial agreement for CBOE's VIX.

Sebi, at its board meeting in Chennai last week, gave its in-principle nod for the launch of various new derivative products including volatility index and its futures & options, bond index and its F&O, mini-index contracts on the equity indices and exchange-traded currency futures.

Krishnan Sitaraman, head (fund services & fixed income research), Crisil FundServices, said: "Crisil would be happy to work with NSE in launching a volatility index. However, to ensure that it completely conforms to Sebi guidelines, we need to wait for the final guidelines to be put out by Sebi before we can construct such an index. Such an index can be launched in a short span of time, given Crisil's expertise in this area."