India VIX Drops 19% as Tensions Ease; Market Breadth Favors Bulls

Volatility Index Sees Sharpest Decline Since April as Ceasefire Calms Investors

The India VIX, a key indicator of market volatility and investor sentiment, plunged nearly 20% on Monday, May 12, following the announcement of a ceasefire between India and Pakistan, sharply easing geopolitical concerns that had fueled market nervousness over the past week. As of 11:10 AM IST, the India VIX was down 17.3%, settling at 17.9, marking its steepest single-day fall since April 15, when the index had dropped 19.8%.

The steep fall in volatility reflects a significant improvement in investor sentiment, driven by expectations that hostilities between the nuclear-armed neighbors would de-escalate, paving the way for stability in the region. The drop in the fear gauge also signaled a return of risk appetite in the broader market.

Highlights:

• India VIX down 17.3% to 17.9, biggest drop since April 15.

• Geopolitical relief fuels decline in market fear and volatility.

• Ceasefire seen as a turning point in restoring market confidence.

Market Breadth Strongly Positive; Over 3,150 Stocks Advance

Market breadth tilted heavily in favor of bulls, as 3,155 stocks advanced on the BSE, while only 342 stocks declined, and 105 remained unchanged, highlighting a broad-based rally across sectors and capitalizations.

The drop in the India VIX, coupled with strong buying interest, especially from foreign institutional investors (FIIs), gave a clear indication of market resilience and potential for further upside. After a brief halt in FII inflows on Friday, May 9, due to heightened tensions, Monday’s relief rally saw foreign flows returning aggressively.

Highlights:

• 3,155 advances vs 342 declines on the BSE at 11:10 AM.

• Ceasefire drives widespread participation across market segments.

• FII activity back on track after brief pause during conflict peak.

Sensex and Nifty Extend Gains as Broader Markets Outperform

By 11:30 AM IST, the Sensex surged 2,336.85 points or 2.94% to 81,791.32, and the Nifty jumped 724.25 points or 3.02% to 24,732.25, driven by renewed optimism around geopolitical stability, strong macroeconomic outlook, and robust quarterly earnings. All sectoral indices traded in the green, while broader indices such as mid- and small-caps continued to outperform the benchmarks.

Analysts expect the FII-led rally to gain traction, particularly in large-cap blue-chip stocks like ICICI Bank, HDFC Bank, Bajaj Finance, RIL, L&T, Bharti Airtel, Ultratech, M&M, and Eicher Motors. Additionally, midcap IT and digital tech stocks are poised to be major beneficiaries as risk appetite broadens.

Highlights:

• Sensex at 81,791.32, Nifty at 24,732.25 as of 11:30 AM.

• All sectoral indices in the green; mid and smallcaps outperform.

• FII interest expected to remain strong in blue chips and digital stocks.

Positive Domestic Macros and Long-Term Outlook Sustain Bullish Sentiment

The upbeat market tone is further reinforced by positive domestic macroeconomic fundamentals, including expectations of high GDP growth, earnings revival in FY26, declining inflation, and a dovish interest rate trajectory. These factors are expected to underpin sustained momentum in the equity markets over the coming quarters.

According to Devarsh Vakil, Head of Prime Research at HDFC Securities, India’s long-term equity outlook remains favorable, anchored in robust business growth, a young population, and a rapidly evolving digital economy that offers diversified and high-quality investment opportunities across sectors.

Highlights:

• Macros supportive: High GDP growth, falling inflation, and rate cuts likely.

• India’s demographics and digital push create long-term investment potential.

• Institutional participation and earnings revival to fuel next leg of the rally.