Why is VIX crashing ?

3 min read

Today, we’re delving into an intriguing infographic from Samco focused on India’s market dynamics. One key metric highlighted is the VIX, which measures market volatility. Surprisingly, the VIX has taken a sharp 17% dive, catching many off guard, especially considering the impending election results. Typically, during election periods, one would expect the VIX to rise due to increased uncertainty. However, the current drop suggests otherwise.

Source : SAMCO

Reflecting on past election cycles, such as the 2014 and 2019 results, we witnessed significant VIX drops post-election, indicating a reduction in uncertainty. However, the unexpected plunge in VIX at the start of this session on April 23rd has left market participants puzzled. This deviation from the norm begs the question: why has the VIX collapsed amidst ongoing elections?

With the first phase of elections completed, there’s been no definitive evidence to justify the sudden complacency reflected in the VIX drop. The voter turnout and other observed factors do not seem to align with such a drastic decline in volatility. Speculation abounds regarding the underlying reasons behind this unexpected market behavior.

One plausible explanation is that the VIX failed to spike significantly during this election cycle, leading to a subsequent collapse following a recent uptick. This suggests that the market may have already factored in any potential volatility, resulting in a stabilized outlook for the time being. However, as we approach the election results, the landscape may shift once again, warranting close observation.

We invite you to share your thoughts on this intriguing development. Why do you think the VIX has experienced such a notable decline amidst ongoing elections? Your perspectives and insights are valuable as we seek to unravel the mysteries of the market’s behavior. Feel free to leave your comments below, and let’s engage in a discussion about this intriguing trend.

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There has always been a frenzy in the stock market around multibaggers. 

You will often come across stories that go like this – “Oh I bought this stock when it was trading around Rs 25 and today it is trading at Rs 250”. “I made a handsome 10x on this stock”

But, people seldom discuss negative outcomes or stories of their failure. Aspects like risk mitigation, position sizing & opportunity cost often take a back seat paving way for cooler discussions around multibagger stocks. 

Consider the case of “VEDL”. After making a high of Rs 484, the stock has virtually remained flat for 14 long years. One may wonder whether it is even possible to successfully navigate through the troubled waters of a choppy stock like this one but that is where the beauty of momentum lies. 

VEDL entered Mi NNF 10 back in Apr 2021 at a time when most might wonder “Why now”. The stock may not have gone on to become a multibagger for the portfolio but just the fact that a rule based approach could successfully maneuver through a stock like this without having to face a loss & instead to come out with a reasonable gain of 50% speaks volumes about the ability of momentum investing to keep you calm and composed at all times without having to worry about the outcomes too much. 

So multibagger is not the only thing that sounds cool, 

Identifying and extracting momentum in a stock that has remained stagnant for 14 years is also a story worthy of a discussion. 

Disclaimers and disclosures : https://tinyurl.com/2763eyaz

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    Why is VIX crashing ?