Fear gauge India VIX spikes 8% in a week. Here are 3 tips to avoid a crash
India's fear gauge, the
India VIX
, has surged over 8% in the past week, and the impact was evident on Dalal Street on Tuesday as benchmark indices swung wildly. Selling pressure in auto, IT, and financial stocks added to the
volatility
ahead of the monthly expiry on Thursday. The VIX jumped nearly 6% during the session, hitting a high of 19.06, as the
Nifty
moved within a 300-point range and the BSE Sensex fluctuated over 1,100 points between its intraday high and low.
Commenting on the day's action, Nilesh Jain, Head Vice President, Equity Research Technical and Derivatives at Centrum Broking said that volatility in the markets has been quite high over the past 2-3 sessions, with India VIX moving from levels around 15 to 19, today. He attributed this to the presence of high concentration of call writers who are preventing any short covering move and creating a strong resistance at 25,000.
Analyst VK Vijayakumar, Chief Investment Strategist, Geojit Investments the market to likely consolidate around the current levels in the near-term. "A sustained rally will happen only when leading indicators suggest revival in earnings growth. Since mutual funds are sitting on sizeable cash any dip will be bought into and high valuations will trigger selling on rallies," he added.
Vijayakumar also decoded the current investor mood, saying that there is a slow accumulation in rate-sensitive sectors like autos in anticipation of more rate cuts which are almost sure to happen since inflation is trending down. The investors are staying invested by way of SIP with a longer time horizon.
The Reserve Bank of India (RBI) will hold its monetary policy (MPC) next week and the outcome will come on June 6.
What is leading to volatile trade?
Markets stabilized after President Donald Trump paused the reciprocal tariffs on April 9, triggering a nearly 9% rally in the Nifty. However, fresh concerns emerged following his recent comments on trade negotiations with the European Union, where he claimed the talks were going "nowhere" and threatened to impose a 50% tariff, though he later deferred the decision from June to July. Adding to the uncertainty, Trump also warned of a potential 25% tariff on smartphone makers like Apple and Samsung if they continue selling devices in the U.S. that are manufactured overseas.
US yields are up amid current uncertainties and investors seem to be booking profit after the recent rally in Indian equities and moving to less risky assets, Aamar Deo Singh, Senior Vice President-Equity, Commodity & Currency at Angel One opined.
Also Read:
Bitter-sweet ride: 10 sugar stocks outperform Nifty with up to 77% returns, but 18 sink as much as 36%
4 things that investors should do:
1) Avoid aggressive bets on index futures & options (F&O), including Nifty and Bank Nifty, Jain said.
2) Adopt a stock specific approach and use corrections as a buying opportunity, Jain of Centrum Broking said.
3) Angel One's Deo advises investors to buy in small tranches with a long-term horizon. He suggests sector diversification with trusted names like HDFC Bank and Reliance Industries (RIL).
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