NSE unveils volatility index to gauge market swings

Different people can use a VIX for different purposes, Narain said. Some people may take it into their books and trade on it. Others may hedge, and some may make changes in their asset class, he said.

"Greater the liquidity in the options segment, better the index. There are also plans to introduce an intra-day volatility index once this one finds acceptance among market participants," a senior NSE official added.

Welcoming the launch of India VIX, a market analyst said, "The India VIX value provides the expected volatility perceived by the market over the next thirty calendar days. Based on the India VIX value an investor can perceive the expected change in his portfolio of investments and thereby take necessary risk management action to safeguard against the uncertainty."

"Globally such volatility indices are used by those investors who use stock and index options frequently. For India, it would be very useful for hedge funds and foreign institutional investors (FIIs) who invest through the options route," the analyst said.

In a related development, stock market regulator Securities and Exchange Board of India's (SEBI) chairman C.B. Bhave said it might soon allow launching products based on a volatility index.

"The advantage of measuring things is to first define them. The volatility index will increase the understanding among people. Once that happens, we will be ready to launch products based on it," Bhave said.