The sharp drop in volatility came after the India VIX index surged to over twice its level in March, rallying a whopping 104% as the war between Iran and US rattled global markets and pushed oil prices above $110 per barrel. Dalal Street saw a massive correction during the period, with Sensex and Nifty crashing around 11%. However, markets began to recover in April following ceasefire hopes, although Trump’s decision flip flops keep investors on edge.
Iran-US ceasefire
US President Donald Trump has now said that Washington agreed to a two-week pause in attacks and received a 10-point proposal from Iran, which he described as a workable basis for negotiations. “This will be a double sided CEASEFIRE!” he wrote on Truth Social.
Iran meanwhile agreed to allow safe passage through the Strait of Hormuz for two weeks. Iran’s Foreign Minister shared a statement on behalf of the Supreme National Security Council, which thanked leaders of Pakistan for brokering the talks. Iran’s Supreme Security Council said negotiations with the United States would begin on April 10 in Islamabad, after it submitted its proposal via Pakistan, although it added that the talks did not signal an end to the war.
Oil prices drop below $95/barrel
The two-week halt to the raging war and Iran’s announcement of reopening the Strait of Hormuz provided a much-needed relief to the sky-rocketing rally in oil prices.
Brent crude futures dropped more than 13% to $94.75 per barrel, while WTI Crude fell nearly 17% to $95.17 per barrel, as seen at 1.11 pm. As risk-on sentiment returned, the India VIX crashed around 21% to 19.58, while Sensex rallied nearly 2,900 points (around 4%) and Nifty neared 24,000.
What lies ahead?
The sharp drop in India VIX, widely seen as the market’s “fear gauge”, points to a rapid cooling of volatility expectations, driven largely by easing geopolitical tensions following recent ceasefire developments in West Asia, said Harshal Dasani, Business Head, INVasset PMS. He explained that the de-escalation has reduced immediate tail risks around crude oil supply disruptions and global risk sentiment, prompting a sharp unwind in hedging positions.
Historically, such steep declines in VIX tend to coincide with improved risk appetite and steady equity market traction. “With India heavily reliant on oil imports, any stability in crude prices post-ceasefire directly supports macros, including inflation and fiscal balance, thereby underpinning equities,” he added.
Calm before the storm?
However, the fall in volatility shouldn’t be mistaken for “risk-free environment”, Dasani cautioned. “Periods of sharp VIX compression often lead to market complacency, where even minor negative triggers can spark sudden corrections. While the ceasefire has provided near-term relief, its durability remains uncertain, and global cues, including interest rate trajectories and commodity movements, will continue to influence sentiment,” he said.
In the near term, the lower VIX supports a constructive bias with a gradual upward grind in markets. Dasani further added that investors should however remain cautious, as volatility tends to revert quickly, especially in an environment where valuations remain elevated and geopolitical risks can resurface abruptly.
Technical view
Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities, meanwhile said that the India VIX index has now slipped below its 20-day EMA for the first time since 18th February 2026, indicating a meaningful cooling-off in volatility after an extended phase of uncertainty. “This contraction in VIX is a clear positive for the bulls, and the price action is reflecting that confidence. Markets opened with a strong gap-up following the US–Iran ceasefire news and, more importantly, sustained those gains throughout the session rather than witnessing intraday profit booking. This ability to hold higher levels signals improving risk appetite,” he said.
Every intraday dip over the past four sessions have been bought into, marking a notable departure from the previous month’s pattern where pullbacks were consistently sold into, and this behavioural shift suggests that market participants are gradually transitioning from a “sell-on-rise” to a “buy-on-dips” approach, Shah said. “From a volatility standpoint, India VIX is likely to cool off further, with 18.5 acting as immediate support, followed by 16. A continued decline in volatility typically provides a supportive backdrop for equities,” he added.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)