There is a fear of 'volatility' in the stock market! understand before investing money

Ronit Kawale
Ronit Kawale - Senior Editor
4 Min Read

Stock Market Knowledge: Volatility is increasing in the stock market, so investors need to be a little cautious. You must have often heard this from market experts. But, do you know what this volatility is? After all, why do we see rapid fluctuations in the market when volatility increases? If you invest or wish to invest in the stock market, then you must know about volatility. Every experienced and smart investor pays attention to volatility before trading in the market. The greater the volatility, the greater the risk of investing in the market.

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There is India Vix index to find out the volatility in the share market. Volatility can be detected through this. Let us now tell you what volatility is and how it affects investors' deals.

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What is volatility?
In the stock market, when there is rapid fluctuation in the price of a stock or the level of an index, it is called volatility. Volatility in Hindi can be understood as instability. In such a situation, the market remains unstable because the prices of shares rise and fall rapidly. Generally, one should not invest or trade in highly volatile markets.

According to Anuj Gupta, Head of Commodity, HDFC Securities, market volatility is when the prices of shares or indices fluctuate rapidly. Volatility occurs not only in the stock market but also in the commodity market. The good thing is that money can be earned through both bullish and bearish movements in the volatile market. But, it is good for F&O traders only.

A boon and a curse for the F&O trader
The more the volatility increases in the market, the more the premium of the stock or index option increases and decreases. Since, future and option trading is high risk and high reward. In such a situation, when volatility increases, there is an opportunity to earn more and more money due to rapid fluctuations in option prices, but at the same time the risk is also the same, hence investors are always advised to trade with caution in the volatile market. .

When does volatility increase, how to check
The only reason for increase in volatility in share or commodity market is important events. Whenever any global or domestic event is about to happen which can have an impact on the market, confusion or instability increases in the market. Generally, volatility increases if any unpleasant event including US Federal Reserve, RBI meeting, increase in crude oil prices, war etc. impacts the market. You must have often seen that the stock market rises and falls rapidly before and after the announcement by RBI or the budget.

India Vix index is used to check the volatility in the stock market. Anuj Gupta said that generally if India trades at 12 to 14 then the markets remain stable. But, if it reaches 20, 22 or 24, there is tremendous volatility in the market.

Tags: BSE Sensex, Business news in hindi, Share market, Stock market today

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