Ram: Hi Lakhan. Is everything okay? You seemed a little disturbed over call.
Lakhan: Everything is fine Ram. It’s just that my stocks are a little down. I know the markets are volatile and wished there was something which could tell me about this volatility just like the stock indices tell about price movement.
Ram: I get your point. However, there’s an index that helps you gauge volatility in the short-term.
Lakhan: Oh really! Can you tell me more about it?
Ram: Sure. You see volatility index is an index which reflects the market’s volatility in the near term. With this index you can know how much will the market fluctuate in the short term in the next 30 days. It was the National Stock Exchange (NSC) which launched the Indian Volatility Index in April 2008.
Lakhan: How to read this index?
Ram: Reading this index is very easy. If the volatility index says 30, it means that the market is expected to fluctuate by 30% in the next 30 days or one month.
Lakhan: I see. How is this index different from other market indices such as Nifty and Sensex among others?
Ram: Good question. You see the volatility index differs from indices such as Nifty and Sensex because it captures the mood of the market which’s likely to prevail in the short term. However, indices such as Nifty and Sensex give you an idea about the stock’s price in the real time. Volatility index, in other words, is a forward-looking index.
Lakhan: I get it. From whatever you’ve said, it seems that this index has an inverse relationship with markets?
Ram: You are spot on Lakhan! Volatility index indeed inversely proportional to market. In other words, when markets are down, this index shots up. On the other hand, when the markets are up, the index is down.
Lakhan: Thank You so much Ram. I will now use the volatility index to find out how the markets will behave in the coming days.
Ram: Good Lakhan. However, here I would like to tell you that you must not base your investment purely on this index. Your investment must be guided by your life goals and most importantly your risk appetite. If you invest in fundamentally sound stocks, then there’s no reason for you to worry. Don’t panic, remain invested and you should do well.
Lakhan: Thank you so much Ram.
Ram: My pleasure Lakhan.
Click here to open an online trading account.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
Tuition fee deduction under Section 80C of Income Tax Act
Educating a child can be an expensive proposition for most parents. As the cost of quality education is on the rise, the potential for saving money seems less likely. However, there are tax benefits that can be availed under the provisions of the Income Tax Act, 1961. Recurring expenses such as tuition fees is one such category that qualifies for tax relief, subject to certain terms and conditions.
6 Things you Should Know Before Buying Insurance Policy for Bike
Buying or renewing an insurance policy for your bike can often be overwhelming. Check out this short guide to know the factors you should consider while choosing the best insurance policy for your bike.
PPF Withdrawl: When & How to Withdraw PPF
PPF (Public Provident Fund) is a savings scheme, which is backed by the government on purpose to build a retirement corpus. As PPF is a long-term investment, it comes with a specified lock-in period. Read on to know about the maturity period and the withdrawal systems.
5 Types of Business Loan For Woman Entrepreneurs
There are now many different types of loans options in India for women wanting to explore their entrepreneurial dreams. Read this post to know 5 of the most popular options.