India VIX, or India Volatility Index, is a key sentiment indicator calculated by the NSE using NIFTY 50 option prices (best bid/ask) to measure market expectation of 30-day volatility

. Known as a "fear gauge," it computes annualised volatility derived from near-month and mid-month OTM options, representing market risk and uncertainty rather than direction. 

Key Details and Formula
The India VIX is based on the CBOE VIX methodology, adapted to NIFTY. 

• Formula:

  India VIX=σ×100India VIX equals sigma cross 100

  India VIX=𝜎×100.
• Component Formula:

  σ=2T∑iΔKiKi2eRTQ(Ki)−1T[FK0−1]2sigma equals the square root of the fraction with numerator 2 and denominator cap T end-fraction sum over i of the fraction with numerator cap delta cap K sub i and denominator cap K sub i squared end-fraction e raised to the cap R cap T power cap Q open paren cap K sub i close paren minus the fraction with numerator 1 and denominator cap T end-fraction open bracket the fraction with numerator cap F and denominator cap K sub 0 end-fraction minus 1 close bracket squared end-root

  𝜎=2𝑇𝑖Δ𝐾𝑖𝐾2𝑖𝑒𝑅𝑇𝑄(𝐾𝑖)−1𝑇𝐹𝐾0−12⎷.
• Key Inputs:
  • 

    σsigma

    𝜎: Calculated variance.
  • 

    Tcap T

    𝑇: Time to expiration (calculated in minutes).
  • 

    Fcap F

    𝐹: Forward index level (derived from NIFTY futures).
  • 

    Kicap K sub i

    𝐾𝑖: Strike price of

    ii

    𝑖-th OTM option.
  • 

    ΔKicap delta cap K sub i

    Δ𝐾𝑖: Interval between strike prices.
  • 

    Rcap R

    𝑅: Risk-free interest rate (MIBOR).
  • 

    Q(Ki)cap Q open paren cap K sub i close paren

    𝑄(𝐾𝑖): Mid-quote price of option with strike

    Kicap K sub i

    𝐾𝑖. 

Interpretation and Analysis 

• High VIX (e.g., >25): Indicates high fear, uncertainty, and expectation of sharp market swings, often leading to higher option premiums.
• Low VIX (e.g., <15): Suggests calm market conditions, stability, and lower expected volatility.
• Application: Traders use it for hedging; when VIX is low, insurance (puts) is cheaper; when high, it is expensive.
• Market Direction: It does not predict direction, only the magnitude of movement. 

Formula Example
To calculate the expected market move for the next 30 days:

Expected Monthly Change=Current Nifty×India VIX100×30365Expected Monthly Change equals Current Nifty cross the fraction with numerator India VIX and denominator 100 end-fraction cross the square root of 30 over 365 end-fraction end-root

Expected Monthly Change=Current Nifty×India VIX100×30365

.
If Nifty is at 20,000 and VIX is 15:

20,000×15100×0.082≈20,000×0.15×0.286=858 points20 comma 000 cross 15 over 100 end-fraction cross the square root of 0.082 end-root is approximately equal to 20 comma 000 cross 0.15 cross 0.286 equals 858 points

20,000×15100×0.082√≈20,000×0.15×0.286=858 points