India VIX Plunges 15% in Two Days: Analysts Weigh Short-Term Market Outlook

Indian Markets Rally Amid Falling Volatility

The India VIX, a gauge of market volatility, declined by 15% over the last two trading sessions, with a significant drop of 8% on March 17, as the markets rallied during the same period. This decline in volatility suggests a potential decrease in selling pressure, but analysts caution that the markets are still not out of the woods.

Nifty closed higher by 172 points on March 17, following a positive start to the session. The index filled the crucial resistance of Monday's opening upside gap around 23,550 levels and closed around it. The daily chart formed a reasonable positive candle with minor upper and lower shadows, indicating a high wave type candle pattern after a rise. However, this could pose a challenge for bulls to sustain above 23,600-23,700 levels in the short term.

The underlying short-term trend of Nifty is positive, but the market is not completely safe unless it closes above 23,600-23,700 levels. Any failure to sustain the highs could lead to a new lower top in the market and subsequent weakness. Immediate support is placed at 23,350 levels.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Technical Analysis

• Nifty has given a falling channel breakout on the hourly chart, suggesting a rise in optimism.
• The index has moved above the 21EMA on the hourly timeframe.
• The sentiment is likely to remain slightly positive, with a possibility of a rise towards 23,800-24,000.
• Crucial support is placed at 23,400; a fall below this level might reactivate the bears in the market.

Market Outlook

• Nifty continued its pullback rally for the second day in a row and closed near day high.
• A double bottom formation on the intraday charts suggests further upside potential.
• 23,700 stands as the immediate resistance; a breach above this level could clear the path towards 23,835.
• Conversely, a decisive break below 23,300 would signal a resumption of the downtrend.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Upcoming FOMC Meet

The upcoming FOMC meet is expected to be a non-event for markets, with analysts predicting a likely status quo on rates. The market's attention is focused on de-escalation in the Iran war, rather than the FOMC meeting.