What is India VIX and how it reflects market turmoil
What's the story
India's volatility index (India VIX), or business fear gauge, has surged over 59% to 21.94 today.
This is one of the biggest single-day jumps in five years, reflecting increased volatility and panic in the stock market.
The last time a steep rise like this was seen was during the COVID-19 crisis, hinting at the possibility of wild swings by the market on either side.
Market forecast
Nifty may swing between 500-1,000 points
Rajesh Palviya Jain, Senior Vice President - Research (Head Technical and Derivatives) at Axis Securities, has weighed in on the implications of this sharp rise in the India VIX.
He said that "the sharp move in the India VIX points to elevated risk and uncertainty," predicting potential swings of 500 to 1,000 points for Nifty in upcoming sessions.
Trends
Nifty's breach of 100-week moving average raises concerns
Jain also raised concerns over Nifty breaching its 100-week moving average—last broken during the COVID-induced market crash.
He called it a "worrying sign" reflecting deep fear and a potential shift in near-term trend.
Jain further stressed that unless the VIX cools off to more stable levels around 18, no meaningful or sustainable recovery is likely to take place.
Global impact
Global markets impacted by trade war fears
The heightened fear isn't limited to India alone.
Global markets have also taken a hit, after China decided to impose 34% tariffs on US goods, raising fears of a trade war.
The CBOE VIX, which measures the expected volatility in the S&P 500, based on options trading, jumped past 39.60—its highest level since the unwinding of the Yen carry trade in August—reflecting intense fear among global investors.
Economic concerns
US Federal Reserve's cautious stance adds to market uncertainty
Adding to the global uncertainty, US Federal Reserve Chairperson Jerome Powell took a more cautious approach on rate cuts amid rising inflation concerns and slowing growth expectations.
The decision has further fueled the risk-off sentiment, gripping financial markets across the globe.
Historically, there have only been two occasions when the India VIX crossed the 50-mark—once during the 2008 financial crisis and once during March 2020.
Market analysis
Nifty's next critical level is around 21,200
Looking ahead, Jain believes the next critical level for Nifty is around 21,200—a level that coincides with the election-period low and a key support. Breaching this zone could not just signal continuation of the current downtrend but also a breakdown of a broader structural range.