- India VIX surged 20% to a 10-month high on March 4 amid rising market volatility
- Sensex and Nifty 50 dropped over 2% due to US-Iran war-related risk concerns
- India VIX rose 50% over three sessions amid ongoing geopolitical tensions
Indian stock market's volatility gauge, India VIX, jumped 20% to hit a 10-month high mark on Wednesday, March 4, as the domestic equity benchmarks Sensex and Nifty 50 extended losses by over 2% amid the US-Iran war-led risk premium. In the last three market sessions, the VIX volatility index has jumped 50% due to the ongoing geopolitical tensions. The Middle-East war has rattled financial markets, spiked crude oil prices, and dragged the domestic currency lower against the US dollar.
The rise in the market's dear guage signals a rise in near-term volatility expectations. Unlike the Nifty 50 or the Sensex, which track stock price movements, India VIX measures the cost of hedging market risk. It is derived from the order book of Nifty options, based on the bid and ask prices of out-of-the-money (OTM) contracts. When traders anticipate sharp market moves, demand for options rises, pushing the VIX higher. Conversely, a low VIX reflects market calm and investor complacency.
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Stock Market Crash
Indian equity benchmarks extended rout for the third consecutive trading session amid a global selloff triggered by the escalating crisis in the Middle East. The BSE Sensex fell over 1,500 points at the open to 78,663, while the NSE Nifty 50 fell over 500 points or more than 2% to 24,366. The rupee depreciated as much as 55 paise at the open and weakened to a record low at 92.02 against the US dollar. Foreign portfolio investors logged the biggest one-day exit from D-Street in four months.
Among the stocks moving the markets today, Bharat Electronics traded around flat after moving between gains and losses, while HAL fell as much as 2% to Rs 3,870. L&T extended its decline to 7% amid concerns over order execution linked to the Middle East situation. Asian stocks fell for a third consecutive day, with Kospi down almost 12% over the last two days.
The dollar index strengthened for a third day, while gold rose 1.4% on safe-haven demand. South Korea's Kosdaq fell for a second straight day, triggering a circuit breaker that halted all trading on the Kosdaq market for 20 minutes. The Korea Exchange said this is the 11th time a circuit breaker has been triggered on the Kosdaq.
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Market Outlook
According to Shrikant Chouhan, Head Equity Research, Kotak Securities, currently, the Indian stock market is trading significantly below both short-term and medium-term averages, and on daily charts, it appears to be in a weak formation, indicating a largely negative outlook. The expert suggests buying fundamentally stronger stocks.
''We are of the view that, for positional traders, 24,600 would act as a crucial support zone. If the market slips below this level, the correction could continue until 24,300. Further downside may also persist, potentially dragging the index to 24,000. On the flip side, 25,000 remains the crucial resistance zone for the bulls. The current market texture is extremely volatile and is expected to remain volatile in the near future,'' said Chouhan.
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