Market volatility index drops by another 15%

The volatility index or the 'India VIX' cooled by another 15 per cent on Friday after the decisive victory in the general elections for the BJP-led National Democratic Alliance (NDA) brought cheer to investors.

This is second drop in as many days. The volatility index had fallen significantly even on Thursday when it became clear that the incumbent government is going to retain power at the Centre.

The Volatility Index (VIX) is a measure of market expectation of volatility, or the magnitude of changes, in share prices that represent a risk. The higher the number, the higher is the risk for market participants and vice versa.

The VIX, also know as the 'fear index', had touched record levels in the run-up to the elections. It saw a massive drop on Monday after exit polls pointed at Prime Minister Narendra Modi's victory, but then it surged again.

The VIX had touched levels not seen since 2014, climbing up to 30 on Wednesday, just a day prior to May 23 when the votes were counted.

The return of the incumbent government with a strong mandate is a signal that there would be stability in the policy regime. For investors, this presents the best case scenario as political uncertainty is eliminated and policy continuity is ensured.

--IANS

ravi/sn/bc