The decline came after US President Donald Trump said the war with Iran could end very soon, easing concerns about prolonged disruptions to global oil supplies. The remarks triggered a sharp pullback in oil prices and boosted hopes that inflationary pressures may ease, potentially giving the U.S. Federal Reserve more room to consider interest rate cuts.
“With tensions now showing signs of cooling, volatility could decline rapidly toward the 17 level or lower. Such a sharp contraction in VIX would lead to a corresponding fall in options premiums. Given that today also coincides with Nifty’s weekly expiry, derivatives traders will need to account for the possibility of a sudden volatility crash while positioning in options,” says Hariprasad K, SEBI-registered Research Analyst and Founder, Livelong Wealth.
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The surge in India VIX indicates that traders are pricing in wider market swings in the near term. A rising volatility index typically reflects expectations of larger price movements in equities, often driven by macroeconomic or geopolitical shocks.
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Satish Kumar, managing director and head of research at InCred Research Services, said market corrections are a natural part of the investment cycle and that the downside risk may be limited if geopolitical clarity emerges.
“Market corrections are a part of the cycle. At this stage, we don’t see significant downside risk left in equities if clarity emerges. Oil at around $115 per barrel is unlikely to sustain for long, and once prices stabilise, markets should find their footing again,” he said.
Kumar added that a large part of the geopolitical premium has already been priced into commodities and risk assets, and markets could shift their attention back to earnings and fundamentals if tensions do not escalate further.
From a technical perspective, Anand James of Geojit Investments suggests that the pullback that ensued without dipping much beyond the opening lows and the subsequent close above 24,000 yesterday have rekindled upside hopes. The vertical rise expected thereof today may be limited to 24,300-24,370, followed by consolidation or dips. However, a direct rise above the same could call for 25,000.
Nifty 50 opened with a gap-up near the 24,300 zone but failed to sustain the early gains, encountering immediate resistance at higher levels. The index is currently attempting to stabilise after the recent sharp correction. Immediate support is placed around 24,000, which coincides with the previous closing level, while deeper support is seen near 23,800 if selling pressure intensifies, Ponmudi R, CEO of Enrich Money, said.
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On the upside, 24,600 remains a crucial resistance hurdle, and a decisive breakout above this level could pave the way for a recovery toward the 25,000 psychological mark. Momentum indicators continue to reflect a cautious undertone, with the RSI moving above 30 and gradually turning upward from oversold territory, indicating the possibility of a short-term recovery. However, the MACD remains in negative territory, suggesting that underlying bearish pressure has not fully eased, he added. Overall, the near-term outlook remains cautious to mildly positive, with the market likely to trade within a volatile and range-bound structure.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)