India VIX falls sharply after surging over 70% in a month: What lies ahead for markets?

Shares rise in trade.

• India VIX fell 14 percent to 19.99 as oil prices retreated.
• Sensex jumped 557 points, Nifty rose 179 points on Tuesday.
• Market hopes rise as tensions in West Asia may ease.

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The India VIX recovered sharply on Tuesday after having surged more than 70 percent over the past month.

The volatility index had earlier climbed to a 21-month high as crude oil prices crossed USD 100 per barrel, amid concerns over the expanding US-Israeli conflict with Iran and the risk of disruptions to global supplies.

However, the index declined 14 percent to 19.99 on Tuesday, tracking a fall in crude oil prices and a recovery in global markets on hopes that tensions in West Asia could ease.

India VIX measures the market’s expectation of volatility in the near term. A decline in the index typically indicates easing concerns among investors and an improvement in risk appetite.

Oil prices retreated on Tuesday after hitting their highest level in more than three years in the previous session. The fall came after US President Donald Trump said the war in the Middle East could end soon, easing worries over prolonged supply disruptions.

Market participants said the recent spike in volatility had been driven largely by geopolitical tensions and the sharp rise in oil prices.

Anand James, Chief Market Strategist at Geojit Investments, said the pullback in the market without slipping much beyond the opening lows and the subsequent close above 24,000 in the previous session had revived hopes of an upside.

He said a vertical rise during the day could be limited to the 24,300–24,370 range, followed by consolidation or minor dips. A direct move above this band, he added, could open the door for a rally towards 25,000.

Devarsh Vakil, Head of Prime Research at HDFC Securities, said the benchmark index had recovered strongly from the previous session’s lows.

"From yesterday’s early morning lows of 23,697, the index clawed back more than 300 points to end near its daily high. The 23,697 level now provides immediate support for the Nifty,” he said.

Vakil noted that the Nifty has declined nearly 2,000 points from its recent swing high in the past three weeks.

"Such sharp falls present a good opportunity for long-term investors with cash to deploy to keep accumulating quality investment ideas," he added.

In the broader market, the Sensex jumped 557.52 points, or 0.72 percent, to 78,123.67. The Nifty rose 179 points, or 0.74 percent, to 24,207.05.

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