Something interesting is now happening at National Stock Exchange where NSE is reportedly exploring launch of completely new volatility index . And honestly,this is not just routine update — it could actually change how traders and investors measure market risk in India.
Right now,India Vix is main benchmark that most market participants rely on for reading near-term volatility . But NSE seems to feel that there is room for something better,something built on different methodology that can reflect market movements more accurately.
Preliminary discussions have already started around pilot phase of this new index . According to sources familiar with situation,NSE plans to evaluate how this index actually performs during periods of high market volatility . That testing phase may run for several months and will involve consultations with wide range of people — market participants,academic experts and industry analysts all included.
And honestly,that kind of inclusive approach is not small thing . Getting inputs from so many different stakeholders before formal launch shows NSE is trying to be careful this time around .
Key things being reported about this development:
- Index will be tested specifically on its performance during volatile market days.
- Insights from academics and market professionals will directly shape how index gets developed.
- NSE may eventually introduce derivatives contracts linked to this new index .
That third point is actually the most interesting part of whole story . NSE had previously launched futures based on India Vix back in 2014 . But those were discontinued in 2017 because liquidity was too low and market participation remained limited . So this new effort is essentially second attempt at making volatility-linked derivatives work in India.
NSE has communicated that it filed draft red herring prospectus with Securities and Exchange Board of India for regulatory approval of any new derivatives contracts linked to this index . Currently exchange already offers derivatives on Nifty 50,Nifty Bank and several other indices . Only Nifty 50 has weekly expiry contracts,as mandated by Sebi.
Exchange is also planning to launch contracts on Nifty India FPI 150 index scheduled for August 12 . So clearly there is bigger push happening right now to expand derivatives offerings across board .
But real question nobody can fully answer yet is whether market participants will actually engage with new volatility index this time . Because same problem that killed India Vix futures in 2017 — low liquidity,limited participation — can easily repeat itself if product design does not connect with how traders actually operate . Good intentions from exchange side are one thing,but actual market adoption is entirely different challenge…
