India VIX, which measures expected volatility in the equity market, jumped 8.5 percent to 24.75, the highest level since March 15, 2022, amid overall weakness in the market sentiment on the back of rising inflation, tightening monetary policy and concerns regarding global growth.
Indian indices declined for the fifth straight session on Thursday following weakness in global peers after US inflation numbers failed to soothe investor fears. Further, a weak rupee and continuous FII selling also dragged the sentiment. While losses were seen across all sectors, banks, financials and metals contributed the most to the fall.
Generally, volatility rises with the increasing uncertainty in the equity markets and when it subsides, the market turns stable, supporting the bulls over the bears.
"Inflation continues to be a major headwind for markets. Consumer inflation in the US in April coming at 8.3 percent reinforces the market's concern about aggressive rate hikes by the Fed and the possibility of a US recession in 2023. With the dollar index at 104 and expected to strengthen further FIIs are likely to continue selling till Indian valuation becomes attractive. Even though DII buying is more than FII selling now, that is not enough to lift sentiments in the market since the macro headwinds are strong," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Nifty PSU Bank was the biggest loser among sectors, down over 4 percent followed by Nifty Metal, down over 3 percent. Meanwhile, Nifty Bank, Nifty Financials, and Nifty Auto lost over 2 percent each.
TCS, HCL Tech and Asian Paints were the only 3 gainers on the Nifty50 index. Whereas Hindalco, IndusInd Bank, Adani Ports, Tata Motors, and Tata Steel were the top losers on the benchmark, down between 3.5-6 percent each.
Meanwhile, Wipro was the only gainer on Sensex. Its top losers included IndusInd Bank, Bajaj Finance, Tata Steel, Bajaj Finserv and Axis Bank.
Vijayakumar added that the market's preference for value over growth is reflected in the strength of high-quality banking stocks which are even now at buyable valuations.
Market experts believe that volatility will remain high in the near term, on the back of weak global cues, however, long-term investors should not be bothered by short-term worries and to pick quality stocks for their long-term investments.