Market volatility gauge India VIX spikes 8% on tariffs jitters, F&O expiry

India VIX saw a sharp spike as Nifty and Sensex fell by xx per cent and xx per cent, respectively, after Trump's tariff announcement

India's market volatility gauge, India VIX, surged over 8 per cent on Thursday as US President Donald Trump's tariff announcement roiled markets, coinciding with the expiry of NSE derivative contracts.

 

India VIX, the measure of market volatility in the domestic market, rose as much as 8.17 per cent to 12.12 during the session, according to Bloomberg data. The index has been on an uptrend since the latter part of the month, as the deadline loomed for the US trade tariffs. 

 

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 equity market saw a sell-off as sentiment soured after Trump levied a higher-than-expected tariff of 25 per cent. The Nifty50 fell as much as 220 points or 0.89 per cent to 24,635, while the Sensex fell 789 points or 0.97 per cent to 80,695. 

 

The midcap and the small-cap indices fell by 1.47 per cent and 1.59 per cent, respectively. Sectors from textile, auto, and oil and gas saw a plunge on Thursday.  

 

Trump said that India has tariffs that are “among the highest in the world," and are the most "strenuous and obnoxious non-monetary trade barriers of any country."  He further threatened additional penalties over India's energy purchases from Russia. 

 

As things stand now, India faces one of the highest tariffs that the US has imposed, while Vietnam faces 20 per cent tariffs, Indonesia has 19 per cent, and Japan has 15 per cent. Brazil got a reprieve on the implementation of 50 per cent levies. 

 

In the global market, the overnight US market marginally declined after the US Fed kept unchanged interest rates steady for a fifth consecutive time despite relentless pressure from Trump for an interest rate cut.

 

Higher tariff threats, continued foreign portfolio investors (FIIs) selling and rising oil price to a 6-week high above $73 per barrel may negatively impact the market, Motilal Oswal said in a note. Traders must act with caution in the market till any trade tariff negotiation between US-India, analysts said. 

 

Further, Motilal Oswal expect higher intra-day volatility in the market due to the July series F&O expiry today. 

 

The implication of the US tariffs could be the shrinking of the US trade deficit, especially amid a weaker dollar and higher rates, analysts at Nuvama Institutional Equities said. This shall also impart a deflationary impulse to the global economy, hurting trade, growth and earnings everywhere, including India, it said. 

 

Nuvama added that the markets might stay volatile, and more global monetary easing is likely down the line.