Indian markets’ fear gauge India VIX has risen from just over 17 at the end of last month, to 31 on March 9, and if historic trends are to be believed, share market might soon bottom out. According to a recent report by ICICI Direct, since 2015 share markets have bottomed out whenever volatility surges to 30 per cent. “Post 2015, as the markets have started trading at lower volatility levels of 10 per cent, the sharp panic levels in volatility have seen top formation near 30 per cent,” the report says. NSE Nifty-50 tanked more than 500 points today, while India VIX jumped 21 per cent.
Till the end of last week, the report said, volatility levels have seen a surge from 10 per cent to 25 per cent already and a cool-off is expected from 30 per cent. Out of the nine panic situations seen in the last 10 years, the Nifty has bottomed out within a month or two in six instances after posting an average decline of 11-13 per cent. NSE Nifty-50 is down 13 per cent since the first week of January. “In three out of nine times, the Nifty has seen bottom formation in four to five months after posting average decline of 17 per cent,” the report said. The report, released last week, said that Nifty has an important level of investment at 10,800; ICICI Direct today reiterated their analysis saying that 10,400 too is a good investment level.
The ongoing worldwide scare of Coronavirus has seen sell-off across the globe, with cases now in the past few weeks surging in Europe and elsewhere, investors fear the pandemic is pulling the world economy towards a recession. Equity markets in the United Kingdom, United States of America, Germany and France have fallen 15 per cent on average in the last one month. Money has moved to safer assets in bonds and gold, which are expected to give positive returns.