Vix Signals More Market Turbulence

'Despite the current uncertainties, the long-term outlook remains constructive due to strong fundamentals, government initiatives, and a stable banking sector.'

The India Vix -- commonly referred to as 'fear gauge' -- is signalling more turbulence in the domestic markets as fears of hard-landing in the US continues to rattle investors across the globe.

The index, which gives an indication of expected turbulence, rose on Monday by as much as 50 per cent -- the biggest intraday jump in nine years.

The index finally ended 42.33 per cent higher at 20.37, the highest close since June 4, 2024.

The surge on Monday is the highest single-day rise in Vix since August 24, 2015.

The Nifty 50 index fell 662 points, or 2.68 per cent, to end at 24,056. Technical experts say the index has broken key support zones and is precariously poised.

"After a long time, Nifty and Sensex closed below the 20-day simple moving average (SMA), which is largely negative. It also formed long bearish candles on daily charts, which supports further weakness from the current levels," said Shrikant Chouhan, head equity research, Kotak Securities.

"We are of the view that the current market texture is weak and volatile but due to temporary oversold conditions, we could expect one intraday pullback rally," added Chouhan.

During intraday trade, the Nifty had plunged to 23,894.

"A breach of Monday's intraday low could take the Nifty to 23,667. On the upside, 24,413 could offer resistance. Global sentiments need to stabilise for the Nifty to start recovering," said Deepak Jasani, head of retail research, HDFC Securities.

Traders can start bottom fishing for small upsides while investors may "wait for some stability to buy and even look to sell partly on bounces," Jasani added.

Siddhartha Khemka, head - retail research, Motilal Oswal Financial Services, said the market may remain volatile in the coming sessions, given the slew of global uncertainty.

"Going forward, we expect volatility to continue ahead of the Reserve Bank of India policy amid multiple global headwinds, including the unwinding of yen carry trades, recession fears in the US, and escalating tensions in the Middle East," Khemka said.

"The US slowdown is a bigger concern and sooner or later the US Federal Reserve (Fed) will bite the bullet of interest rate cuts. This should provide relief in the current environment," he said.

From a long-term perspective, experts say, the outlook remains positive and investors can consider putting cash to use during bouts of correction.

"Historically, periods of volatility have provided opportunities for investors to realign their asset allocation," said Vinit Sambre, head – equities at DSP Mutual Fund.

"If the valuations become more reasonable, this current period of market turbulence can be used strategically to consider raising exposure to equities gradually with a 5-7 years view," Sambre added.

"Despite the current uncertainties, the long-term outlook remains constructive due to strong fundamentals, government initiatives, and a stable banking sector."

Feature Presentation: Ashish Narsale/Rediff.com