National Stock Exchange launches Volatility Index futures

The Exchange is aiming to tap into domestic institutional investor demand for equity futures and options

To help investors hedge near-term volatility risks in their equity portfolio, the National Stock Exchange today launched its futures contracts on India VIX (volatility index) called 'NVIX'.

India VIX is a volatility index based on the index options prices of Nifty.

"Volatility is a different risk class. It has a tremendous potential as every one has to deal with volatility. Anyone who has a portfolio, one who needs to hedge the portfolio for volatility...It could be for institutional or high networth individuals (HNI). It is a broad base usage of this product," NSE MD & CEO Chitra Ramkrishna said after the launch.

Uncertainty is for everyone. This product will help in hedging uncertainty. We expect very good broad-based participation in this product, Ramkrishna added.

NSE is aiming to tap into domestic institutional investor demand for equity futures and options.

The NSE, which constructed India VIX, started disseminating India VIX index in 2009.

India VIX indicates the investor's perception of the market's volatility in the near term. The index depicts expected market volatility over the next 30 calendar days.

A high India VIX value would suggest that the market expects significant increase in volatility, while a low value indicates the reverse. India VIX and Nifty have a negative correlation.