India VIX: Investor fear surges 140% in 2026 as Nifty, Sensex tumble 12% since January – What lies ahead?

Stock markets have witnessed sharp volatility since the US–Israel–Iran conflict escalated on February 28, with risk sentiment weakening and foreign investors continuing to offload equities.

Since the US–Israel–Iran conflict escalated, the India VIX has risen sharply. It increased from 13.70 on February 27 to 22.01 on March 16, a rise of about 61 per cent. Year-to-date, the Nifty VIX has jumped nearly 140 per cent.

What is India Vix?

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India VIX is an index of the National Stock Exchange of India that measures the market’s expectation of volatility for the next 30 days based on Nifty 50 options prices. It is often called the market’s “c”.

When the index rises, it signals higher uncertainty and fear in the market, while a fall indicates lower volatility and relatively stable market conditions.

War impact creates extreme volatility

In a conversation with Zee Business Managing Editor Anil Singhvi, Kotak Mahindra AMC CIO–Equity President Harsha Upadhyaya said predicting the exact market bottom during such geopolitical events remains extremely difficult.

Upadhyaya said geopolitical conflicts tend to trigger sharp volatility in global financial markets, and the current situation is no exception. “It is very difficult to say where this war will stop and how long the volatility in the markets will continue,” he said.

According to him, traders may find the environment particularly challenging due to frequent gap-up and gap-down movements.

Long-term investors should stay disciplined

Despite near-term uncertainty, he said long-term investors should remain disciplined and continue their investment plans. “Investors who are investing for the long term, such as SIP investors or those following systematic transfer plans, can manage this volatility better,” Upadhyaya said.

He noted that such volatile phases appear periodically in markets and are part of the investment cycle.

Traders may face the toughest phase

Upadhyaya said short-term traders could face significant challenges due to sharp swings in stock prices. “For traders, this is a difficult period because the market may see sharp volatility and sudden price gaps,” he said.

He advised that investors with a long-term horizon should avoid reacting to every market movement.

Why foreign investors are selling

Foreign institutional investors have been consistent sellers in Indian equities in recent weeks. Upadhyaya said overseas investors evaluate markets from a global perspective and may allocate funds to other markets when risks rise.

“Foreign investors have several investment options globally. Their perspective and portfolio allocation decisions can be different from those of domestic investors,” he said.

India’s crude oil dependence is a key concern

He pointed out that India’s heavy dependence on crude oil imports could also be influencing foreign investor behaviour. “India’s biggest negative from a macro perspective is its dependence on imported crude oil, and a large part of those imports come from the Gulf region,” Upadhyaya said.

He added that tensions in the Middle East could therefore have a relatively larger economic impact on India compared with some other markets.

Timing the market is extremely difficult

Upadhyaya cautioned retail investors against trying to time the market by selling during corrections and attempting to re-enter later. “The biggest example is the disruption during Covid. Many investors sold during the panic and were unable to re-enter at the bottom,” he said.

He said the recovery that followed was sharp, and many investors missed the rally.

Asset allocation remains the key strategy

Instead of timing the market, Upadhyaya recommended maintaining proper asset allocation and avoiding excessive leverage. “The safer option is to manage asset allocation properly and continue investing in a disciplined manner,” he said.

He added that maintaining patience during volatile phases is often more beneficial than attempting to predict short-term movements.

Market leadership may change in the next rally

Upadhyaya said it is still too early to identify which sectors will lead the next market rally. “We are still in the middle of a down cycle. It is difficult to say today which sectors will lead the next phase of the market,” he said.

According to him, sector leadership usually becomes clear once markets start stabilising. He advised investors to keep their portfolios diversified during periods of uncertainty. “For now, it is better to remain diversified rather than take aggressive sectoral or thematic bets,” Upadhyaya said.

He added that investors can take more focused calls once there is greater clarity on market direction.

Large and midcap funds may offer opportunities

Upadhyaya said valuations in the large-cap and midcap segments appear relatively comfortable compared with smallcaps. “Even if we keep the war aside, earnings recovery expectations were improving earlier, and valuations in large and midcaps remain more comfortable compared with smallcaps,” he said.

He suggested that investors considering SIP top-ups could focus on funds with higher exposure to large-cap and mid-cap stocks. “For conservative investors, a higher allocation to large caps may be suitable. Investors willing to take slightly higher risk can increase midcap exposure,” Upadhyaya added.

Upadhyaya said geopolitical tensions could keep markets volatile in the near term, but disciplined investing remains the best approach for long-term wealth creation.

Stock Market Update

Since the start of 2026, Indian markets have faced significant pressure amid geopolitical tensions. The benchmark BSE Sensex has dropped 10,530.79 points, or 12.36 per cent, while the Nifty 50 has fallen 2,970.20 points, or 11.36 per cent, year-to-date.

The market capitalisation of BSE-listed companies has declined from Rs 4,76,92,270 crore on January 1 to Rs 4,28,45,815 crore on March 16, a fall of about Rs 48.46 lakh crore, or 10.2 per cent.