Market volatility gauge India VIX drops 20% on easing border tensions

India’s volatility gauge plummeted during Monday’s intraday session amid signs of de-escalation of an all-out war with Pakistan after a series of strikes by both nations following last month's terror attack in Kashmir. 

 

India VIX, the measure of market volatility in the domestic market, fell as much as 20.46 per cent to 17.79, the lowest level since the end of April, according to Bloomberg data.

 

India VIX measures the market's expectation of future volatility based on the Nifty50 index options contracts. It typically indicates an increase in market volatility and suggests that investors are expecting higher uncertainty or risk in the near future.  The fall in the volatility came as the benchmark indices Nifty50 and the Sensex rose 3 per cent in the intraday session, following a truce with its nuclear-armed rival Pakistan, after tensions nearly rose into a full-blown war.   Follow Stock Market Updates Today LIVE

 

 

On May 9, the volatility gauge rose 8 per cent as tensions mounted after Pakistan fired missiles in Jammu and Kashmir. This comes in after India neutralised air defence radars and systems at many locations in Pakistan, a retaliation to the latter's attempt to engage several military targets. 

 

Conditional ceasefire

 

After four days of intense fighting that threatened to escalate into a full-scale war, India and Pakistan agreed to a full and immediate ceasefire. However, just hours after the truce took effect, explosions were reported in Srinagar.

 

It must be noted that an official ceasefire was not in place - an understanding of a ceasefire was reached. The suspension of the Indus Water Treaty will continue, and there is no decision to hold talks on any other issue at any other place.

 

External Affairs Minister S Jaishankar said that both nations have reached an understanding on "stoppage of firing and military action." In a post on X, Jaishankar said, "India and Pakistan have today worked out an understanding on stoppage of firing and military action. India has consistently maintained a firm and uncompromising stance against terrorism in all its forms and manifestations. It will continue to do so."  ALSO READ | Nifty Pharma drops 2% after Trump reveals plans to lower US drug cost

 

Earlier, US President Donald Trump made the announcement via his official social media handle, where he revealed that the agreement had been reached after an extended round of negotiations. 

 

While the post did not include details about the terms of the ceasefire or the specific issues addressed during the talks, it marks a significant step towards de-escalation between the two nuclear-armed neighbours.