India VIX (Volatility Index) surged over 15 percent to 23 on Monday, indicating nervousness among investors, following a nearly 3 percent fall in benchmark indices amid broad-based sell-off. This is the second-highest level of India VIX in 2021 after it rose over 21 percent on February 26, 2021.
VIX is meant to indicate investors’ perception of the annual market volatility over the next 30 calendar days. The higher the value, the higher is the expected volatility and vice versa.
The indices witnessed heavy sell-off following concerns surrounding lockdowns as the COVID-19 cases rose in India to record high levels and various states imposed further restrictions to tackle the spread of the second wave of the coronavirus pandemic.
Meanwhile, losses in Asian peers also weighed on the market sentiment.
India on Monday reported another record daily surge in coronavirus cases, with the total now eclipsing Brazil’s tally. India reported a record 1.68 lakh COVID-19 infections overnight overtaking Brazil to become the second-most affected country globally by the coronavirus.
India's overall tally reached 13.53 million, surpassing Brazil's 13.45 million cases, according to Reuters. The United States led the global tally with 31.2 million cases. The state of Maharashtra where India's financial capital Mumbai (also the state capital) is located is considering a lockdown and could take a final decision this week, a senior government official said. Track all coronavirus live updates here
The Sensex fell nearly 1,500 points in intra-day deals while the Nifty50 index was trading below 14,500, down over 2.5 percent each. Broader markets were also lower with the midcap and smallcap indcies down around 4 percent each.
"Since the second wave of the pandemic is turning out worse than expected, there is profound uncertainty about its impact on the economy & markets. Since the situation is the worst in economically significant Maharashtra, this can impact the market's assumption of around 11 percent GDP growth & above 30 percent earnings growth. The situation may improve if cases peak soon and start coming down. But presently, this is a negative. The bad health situation and rupee depreciation have improved prospects for the pharma & IT sectors, which are likely to remain resilient even during a market downturn. Economy-facing stocks are likely to be under pressure," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Last year in March when the Sensex and Nifty had crashed to multi-year lows, the VIX had surged as high as 86. The highest India VIX has hit was during the Global Financial Crisis of 2008, where it climbed to 92.53 on November 14, 2008.
(Edited by : Ajay Vaishnav)
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