Quantifying the association of India vix with nifty it and healthcare sector: An empirical study

The current study aims to empirically explore the relationship of India VIX with Nifty IT and Nifty Healthcare indices.

To achieve the study's objective, historical data of the indices have been gathered from the official website of the National Stock Eaxchange (NSE). The study has employed daily data of these indices from April 2009 to March 2023.

The study's empirical findings reveal the negative relationship of India VIX with the returns of both Nifty IT and Nifty Healthcare indices. Incorporating Vector Autoregressive (VAR) model results and Variance Decomposition Analysis (VDA), the study has found that the shocks in India VIX have a significant ability to explain Nifty IT and Nifty Healthcare returns. The lead-lag relationship has also been tested using the Block Exogeneity Wald test and its results show a unidirectional relationship following from India VIX to returns of both the sectoral indices.

Prior research has mostly concentrated on establishing the connection between the volatility index and its underlying index. Therefore, there is a need to study the impact of the volatility index on sectoral indices. This study is the first to examine India VIX's relationship with information technology and healthcare sector indices. The inverse relationship between India VIX and stock indices’ results makes India VIX a valuable hedging tool for diversiffying protfolios and managing investment risk.