The sharp spike had followed a barrage of attacks by the US and Israel on Iran and the ensuing retaliation from Tehran, which rattled global markets and sent risk sentiment into a tailspin.
India VIX currently stands near 18.8, still reflecting the heightened uncertainty that recently gripped markets. “If the positive global momentum sustains, a sharp cooling in VIX could occur, which may lead to a decline in option premiums. In such an environment, options traders may need to remain mindful of volatility compression while planning positions,” Hariprasad K, SEBI-registered Research Analyst and Founder, Livelong Wealth said.
What’s happening today?
Indian equity benchmarks staged a strong rebound on Thursday, opening firmly in the green as improving sentiment lifted risk appetite. The Sensex jumped over 400 points in early trade, while the Nifty reclaimed the 24,600 mark, buoyed by hopes of a potential de-escalation in the ongoing Iran–Israel-US conflict, along with other supportive cues.
Live Events
The prospect of tensions easing in the oil-rich Middle East triggered a sharp recovery across global markets following the recent selloff. South Korea’s Kospi, which had slumped 12% in the previous session, surged 9% in morning trade. Japan’s Nikkei advanced nearly 2%, while Hong Kong’s Hang Seng and China’s Shanghai Composite gained close to 1% each as of 9:10 am IST. Wall Street had also ended higher overnight, with the tech-heavy Nasdaq climbing more than 1% and the S&P 500 adding nearly 1%.
Also read: Iran war shock for Nifty bulls: How to tweak your portfolio for peace of mind
The Indian rupee mirrored the positive momentum, opening 0.63% stronger at 91.57 against the US dollar. The rebound comes a day after the currency weakened to 92.16, slipping past its previous record low of 91.9875 per dollar touched in late January.
What are experts saying?
Somil Mehta, head of retail research at Mirae Asset Sharekhan advises traders and short-term participants to remain cautious until there is greater clarity. “Investors may consider hedging their portfolios via buying puts for the stocks, while traders can use short-term pullbacks as opportunities to initiate short positions in relatively weaker stocks or sectors, until more clarity emerges,” he added.
Nilesh Jain of Centrum Broking said with the VIX holding near 20, traders should remain cautious. “Given the recent gap-down openings and sharp declines, traders may avoid aggressive day trading and large index positions for now,” he said. “While the market appears oversold, any rebound could be a short-lived relief rally until tensions ease.”
Also read: JP Morgan initiates coverage on Adani Ports, JSW Infrastructure with overweight ratings; shares rally 2%
A key risk for India is from the closure of the Strait of Hormuz, a critical route for global oil supplies. A prolonged closure could increase India’s import bill, fuel inflationary pressures and trigger a flight to safe-haven assets such as gold and the US dollar, which in turn, may put additional pressure on the rupee, Mehta said.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)