India VIX Mellows Down On F&O Expiry Day as Trump’s Tariffs Hit Roadblock

India's volatility index is finally taking a breather, thanks to a combination of factors ruling out investor anxiety. So far this month, the volatility index, Nifty vix, has plunged over 8% as concerns around trade tensions eased. In the last 1-week period alone, the index experienced a double-digit drop of 22%. A series of geopolitical episodes has improved the overall investor sentiment across the D-street. Meanwhile, all these events also coincide with the monthly derivatives expiry.

While the US trade court had already blocked Trump's 'reciprocal' tariff policy, POTUS' recent decision to delay the imposition of 50% tariffs on the EU has made investors anything but the opposite jittery. On top of this, India Inc.'s recent Q4 figures signalled some improving trends as well.

"...much of the event-driven volatility either behind us or largely priced in, investor focus should now shift 'From Events to Earnings'. Early Q4 results suggest improving corporate performance, and a 14% compound annual growth rate (CAGR) in Nifty EPS over the next two years is expected," Motilal Oswal Private Wealth said in its recent report.

Adding to this, the recent decline in inflation numbers and increased chances of rate cuts by the central banks have also improved the overall market sentiment on the domestic front. The recent U-turns in Trump's policy stance have eased market fears and helped clear some of the geopolitical uncertainty playing in the background.

"The US Federal court striking down the reciprocal tariffs is a clear message that the maverick president cannot ride roughshod over markets and economy with his questionable decisions. This court ruling is the second big blow to President Trump after the blow delivered by the bond market which forced the Trump administration to pause the tariffs for 90 days. From the market perspective, this is a positive development," said VK Vijayakumar, chief investment strategist, Geojit Investments Ltd.

Valuations at Fair Levels

So far this month, benchmark indices— Sensex and Nifty—have remained largely rang-bound, albeit in the bullish territory. However, analysts believe that the recent market movement has brought the current valuations to fair levels.

"Valuations for large caps (Nifty 50) have moved from attractive to fair following the recent rally, so return expectations should be moderated. While mid and small caps continue to trade at a premium relative to long-term averages, selective opportunities are beginning to emerge in these segments," the report further read.