Stock market crash: Fear index India VIX shoots up to 53% on heightened uncertainty

India VIX, a fear index which measures market volatility, spiked 53.92% to 21.17 on Monday, as per NSE data. The index measures expected market volatility based on Nifty50 index options contracts. A rise in India VIX indicates that investors anticipate higher uncertainty or risk over the short term (30 days). When the volatility index rises, stocks usually tend to fluctuate, making it difficult to predict future market movements.

Domestic benchmarks experienced a steep correction today trade as Asian shares bled up to 10 per cent, following the crash in US stocks. The drop was even more intense in the broader indices (small-cap and mid-cap shares).

"The steep downturn in the market is creating volatility in the market. In the medium- to short-term, there is a lot of uncertainty with respect to the tariff war and its implications on the markets and also, on the earnings of companies. So, this creates uncertainty in the market," said Kranthi Bathini, Director of Equity Strategy at WealthMills Securities.

The fresh round of tit-for-tat between China and the United States raised fears of US recession, including foreign investor outflow from India and other emerging markets. There are concerns that the lack of US market access would lead China to dump its overcapacity in Asia, including India. Further, that are worries that since solutions to the tariff war would take longer, earnings forecasts for corporations globally are at risk.

Since Donald Trump took oath as the 47th US President, India's stock market capitalisation (m-cap) has dropped Rs 45.57 lakh crore to Rs 3,86,01,961 crore from Rs 4,31,59,726 crore on January 20.

"Global stock markets are going through heightened volatility caused by extreme uncertainty. No one has a clue about how this turbulence caused by Trump tariffs will evolve. 'Wait-and-watch' would be the best strategy in this turbulent phase of the market. There are a few things that investors should keep in mind. First, the irrational Trump tariffs will not continue for long. Second, India is relatively better placed since India's exports to the US as percentage of GDP is only around 2 per cent and therefore the impact on India's growth will not be significant. Third, India is negotiating a Bilateral Trade Agreement with the US and this is likely to be successful resulting in lower tariffs for India," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

He believes that domestic consumption themes such as financials, aviation, hotels, select autos, cement, defence and digital platform companies may come out relatively unscathed from the ongoing crisis.

"Trump is unlikely to impose tariffs on pharmaceuticals since he is on the back foot now and, therefore, this segment is likely to show resilience," Vijayakumar added.