Volatility hits highest level since September 2015

The benchmark indices ended sharply lower on Monday as renewed tariff threat on China from the US President Donald Trump dampened the sentiment among the market participants around the world. The BSE Sensex closed at 38,600.34, down by 362.92 points or 0.93 per cent while the Nifty-50 closed at 11,598.25, down by 114.00 points or 0.97 per cent.

The broader market fared better with the BSE Mid-Cap Index down 0.79 per cent and Small-Cap down 0.85 per cent.

Only the Nifty IT Index finished the day in the green while all other sectoral indices closed in the red. The India VIX, which measures the implied volatility of Nifty 50 options soared to a high of 27.83 and finally closed 10.23 per cent up at 26.49, a new 3-years high.

Domestic macro data also dampened sentiments as Indian service sector lost momentum in April, falling to seven-month lows. The services purchasing managers' index (PMI) dropped to 51 in April from 52 in March.

Global cues were negative since opening of the Indian market, among the Asian market benchmarks China's Shanghai Composite Index fell 5.58 per cent, Hong Kong's Hang Seng Index was down 2.73 per cent. European market benchmarks too traded lower down by 1 to 5 per cent at the time of close of Indian market.

Among the Sensex stocks only five stock closed with gains and remaining closed in the red, the top losers were Yes Bank (-5.30 per cent), Tata Motors (-4.49 per cent), Bajaj Finance (-2.33 per cent), Tata Steel (-2.20 per cent), HDFC (-2.13 per cent).

Technical View

Mustafa Nadeem, CEO, Epic Research said, "Bears were in full charge across the globe. A tweet (by US President) devastated the global sentiments with Chinese and other Asian markets losing almost 4-6 per cent. As US President tweeted about increasing China's tariff to a whopping 25 per cent from 10 per cent led a turmoil in the global markets.

"The volatility which was around 23 last week has spiked 28 per cent to 26.5 levels and hit a high of 27.83. This has been the highest level volatility has hit since September 2015. That was about the time when China was seeing concerns over its economy and its health and a possible slowdown," Nadeem said.

"The Nifty is on the verge of a massive event which is LS elections results. This may be a trendsetter but volatility is the spoiler for traders for now. The Nifty as far as above 11,500 may sustain this momentum while a close below 11,500 would negate this bullish momentum," Nadeem added.

Market View

Deepak Jasani, Head of Retail Research, HDFC Securities said, "The Indian markets opened gap down on Monday dragged down by escalation in US China trade tensions. Markets later remained in a range before closing near their opening levels. Market volumes were lower than recent average as buyers stayed away amidst tense times."