India VIX jumps 6%, down 33% so far in 2025: Here are three factors behind the spike on Monday

The volatility gauge India VIX on Monday, December 29, soared over 6% to a high of 9.72 level as the equity benchmark indices gave up their early gains and were trading lower.

In the afternoon session, India VIX was trading at the 9.68 level, gaining 5.81%.

Over a year’s time, the NSE's Volatility Index, or VIX, has tumbled 26.7%, while for six months’ time, it has slipped 22%. So far, from the beginning of 2025, the index has fallen 33%. It had touched a low of 8.18 in 2023.

The index had touched an all-time low level of 2.13 in February 2016 following a freak trade.

The volatility index is a measure of the market’s expectation of volatility over the near term. Volatility is often described as the “rate and magnitude of changes in prices" and in finance often referred to as risk.

The index also indicates the expected short-term fluctuations in an underlying index. It is expressed as annualised volatility (in percentage terms, e.g., 20%) and is derived from the order book of the index’s options.

India VIX is a volatility index derived from NIFTY index option prices. It is calculated using the best bid-ask quotes of NIFTY options contracts to indicate the expected market volatility over the next 30 calendar days. The index follows the CBOE methodology, with modifications to suit the NIFTY options order book, including the use of cubic spline interpolation.

The fall in VIX, or fear gauge, indicates that the investors believe that the worst of the declines may be over.

Here’s why VIX is trading higher today

The Indian equity market remained volatile, as both the SENSEX and NIFTY50 indices gave up early gains and were trading lower in the afternoon session on Monday.

The SENSEX slumped as much as 0.35% to an intraday low of 84,745.59. Meanwhile, the NIFTY50 touched the day’s low of 25,960.70.

After a brief pause, the foreign portfolio investors continued to sell in the Indian equity market. The foreign investors who fled Indian equities in 2025 pulled out a record ₹1.6 lakh crore ($18 billion). A volatile currency movement, global trade tensions, especially potential US tariffs, and stretched valuations eroded risk appetite, though flows are expected to turn sustainably positive in 2026.

According to exchange data, on Friday, the foreign institutional investors (FIIs) sold shares worth ₹ 317.56 crore, while the domestic institutional investors (DIIs) bought equities worth ₹ 1,772.56 crore on a net basis.

The domestic currency on Monday slipped 5 paise to 89.95 against the US dollar in early trade. At the interbank foreign exchange, the local unit opened at 89.95 against the dollar, down 5 paise from its previous close.

On Friday, the rupee depreciated 19 paise to close at 89.90 against the US dollar.