Market Risk Sentiment Shifts
Risk appetite fell across markets and Indian equities dropped, with the Nifty 50 down almost 2.5% to an over 11-month low near 22,550. The US Dollar Index (DXY) rose 0.5% to near 100.00. In March, Foreign Institutional Investors were net sellers on all trading days and sold Rs. 86,780.89 crore of Indian equities. Saudi Aramco cut crude supply to Asian buyers for a second month in April after disruption to trade via the Strait of Hormuz. Attention then turns to preliminary India and US private sector PMI data for March, due on Tuesday. On charts, USD/INR is above its rising 20-day EMA near 92.60, with 14-day RSI at 81.56; resistance is near 94.50 and 95.00, and support near 94.00 and 93.50. With USD/INR breaking its all-time high at 94.40, we see the path of least resistance as upward in the coming weeks. We believe buying out-of-the-money call options, perhaps targeting the 95.00 psychological level, offers a good risk-reward profile. This rapid depreciation is reminiscent of the volatility we experienced back in 2022, when the rupee fell by over 10% against the dollar amid global turmoil. The surge in WTI crude towards $100 is the key driver, and we expect this pressure to continue as long as the Strait of Hormuz is threatened. Since India imports over 85% of its crude oil requirements, every dollar increase in oil prices directly widens its current account deficit. This fundamental pressure supports a sustained long position in USD/INR derivatives.Equity Options And Volatility Strategy
The sharp fall in the Nifty 50, erasing all the gains we saw since the middle of 2025, reflects deep concern over corporate earnings due to higher energy and import costs. With Foreign Institutional Investors already pulling out over Rs. 86,000 crore this month, we anticipate further downside. Buying Nifty 50 put options is a direct way to position for this continued risk-off sentiment. The ultimatum to Iran guarantees that implied volatility will remain elevated across asset classes in the near term. We see this not just as a cost but as a trading opportunity itself, particularly in the options market for both currencies and equities. Traders should be prepared for wide price swings and adjust their strategies to either harness this volatility or hedge against it effectively. We are pricing in the Federal Reserve holding interest rates steady, which will keep the US Dollar strong against emerging market currencies. The Reserve Bank of India is now in a difficult position, as direct intervention to support the rupee has its limits against such strong global headwinds. Any hint of an emergency rate hike by the RBI to defend the currency could create significant moves in interest rate futures and overnight index swaps. Create your live VT Markets account and start trading now.
Start trading now – Click here to create your real VT Markets account
