Fragile calm: War clouds still linger, re-escalation haunts equities

Mint analysis shows a more telling shift: the intensity of the sell-off has steadily eased since the conflict began, with sharp early declines giving way to progressively smaller losses.The sell-off began with a jolt — between 27 February, the last trading session before hostilities escalated, and 6 March, the Nifty and Sensex fell about 3% each as the conflict broke out, followed by a sharper drop of over 5% the next week. Markets then paused, with a largely flat week, before slipping again by over a percent in the week of 23 March.The attacks began on 28 February.From there, the pressure eased.

Losses narrowed to 0.4% for the Nifty and 0.5% for the Sensex the following week. And last week, both indices swung back into the green, rallying nearly 6% each.On Monday, the Nifty 50 fell 1.92% to 23,589.60 and the Sensex slid 2.08% to 75,937.16 as of 9:15 am.A closer look at India VIX, the fear gauge, reinforces this trend.Volatility surged sharply with a 45% spike in the first week of the conflict, but has since cooled off.

It rose 14% the following week and barely 1% after that. While there was a brief uptick of 17.5% in the week of 23 March, the momentum quickly faded, with volatility slipping to 4.8% the next week and dropping a sharp 26% last week.Does this rebound suggest that markets have already priced in a prolonged phase of elevated volatility?“The recent declining trend in India VIX signals that uncertainty is likely to end, with volatility to steadily taper off from here,” said Kkunal Parar, vice president – technical research and algo at Choice Equity Broking.Markets are now getting used to this volatility, he said.