Market mayhem: India VIX soars 49 per cent in biggest single-day jump since 2015; Sensex, Nifty50 plunge over 2 per cent

The India Volatility Index (VIX) skyrocketed by over 49.02 per cent on August 5, reflecting the intensified sell-off in line with global market trends. The VIX exceeded the 20 mark, marking a 52 per cent increase—the largest single-day surge since August 2015.

Indian equity markets experienced a sharp correction, with the Sensex and Nifty 50 dropping over 2 per cent each. The Nifty50 index fell below its budget-day low of 24,074, continuing to decline as major index heavyweights contributed to the downturn.

The sell-off on August 5 was led by Asian markets, with Japan's Nikkei 225 index plummeting over 12 per cent. Trading on South Korea's Kospi halted after hitting a lower circuit, and Taiwan's index fell by more than 8 per cent during Monday's session.

Bond Yield Curve Expected to Remain Flat

Puneet Pal, Head of Fixed Income at PGIM India Mutual Fund, said the Indian bond yield curve is expected to remain flat due to favourable demand-supply dynamics, particularly at the longer end of the curve.

“We expect the Indian bond yield curve to remain flat amidst favourable demand-supply dynamics at the longer end of the curve. The progress of monsoons will be a key factor in assessing the trajectory of food inflation and, subsequently, the RBI’s stance on monetary policy." 

He said the scope for rate cuts in India is due to high real positive rates and the need to encourage private investment, and there is a fair probability of rate cuts in the second half of FY25. “The RBI is also likely to draw comfort from the start of the monetary easing cycle in advanced economies. Bond yields tend to move in advance of rate action, and investors can look to increase allocation to fixed income at every uptick in yields.” 

Pal said: “We expect long bond yields to continue to drift lower over the next couple of quarters. We expect the benchmark 10-year bond yield to go towards 6.50 per cent by Q4 of FY25.”