Number Theory: How global mayhem affected Indian markets

The following charts examine how the crash unfolded and what history tells us about periods of extreme market turbulence

Asian and European stock markets tumbled on Monday amid mounting investor fears of a global recession, driven by intensifying trade tensions sparked by Donald Trump’s tariffs. With major economies showing no signs of backing down, further market volatility is expected. The following charts examine how the crash unfolded and what history tells us about periods of extreme market turbulence.

Reuters photo

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  The recovery Indian markets saw in March has now been wiped off

  Monday’s plunge followed a sharp two-day global sell-off that erased trillions of dollars in market value, as investor anxiety deepened over a potential worldwide recession. The combination of Donald Trump’s tariff escalation and China’s retaliatory 34% tax on U.S. imports has sparked fears of a drawn-out trade war, triggering a broad flight from risk across Asian and European equities. In Japan, the Nikkei ended the day with a steep loss of 7.83%, while in Hong Kong, the Hang Seng fared even worse, plunging 13.22% by the close. The BSE Sensex and NIFTY 50 fell by 2.95% and 3.24% respectively. The Sensex now sits 6.4% below its end-2024 level, having lost all the ground it regained in March. And it is 14.93% down from the peak of 85,978.25 it touched on September 27, 2024. See chart 1
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  All sectors have been hit, some more than the others

  Except for one--Hindustan Unilever--all of the Sensex and NIFTY50 companies ended lower on Monday. Since the announcement of the ‘Liberation Day’ tariffs, all major sector specific indices have seen a fall in the Indian markets. Metal stocks have been the worst hit, with NIFTY Metal falling nearly 14% since April 2. The tariff war between the US and China, especially, have sparked concerns over falling demand for copper, zinc, and other industrial metals, with the two nations making up 45% of global GDP. Similarly, IT stocks have seen a nearly 10% drop over the same period over fears of a fall in demand for their services. See chart 2
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  Rising volatility in the markets

  Rising market volatility has become a defining feature of the current downturn, echoing patterns seen during previous global crises. On Monday, the India VIX, which measures expected near-term volatility, soared by 65.7%, closing just below 23—one of its steepest single day surges in recent history. This surge surpasses even the spike witnessed on August 24, 2015, during the Black Monday selloff, when the index jumped 64.36% amid fears of a sharp slowdown in China and a surprise yuan devaluation. On that day, the Sensex tumbled nearly 6%, and the VIX briefly breached the 35 mark before retreating in the sessions that followed. While history suggests that such extreme spikes tend to unwind within weeks—like in August 2015, when the VIX fell by 55% over the following month—they typically usher in a period of elevated turbulence. What sets the current episode apart is its cause: unlike the prolonged financial unravelling of 2008 or the policy-induced swings of March 2020 at the onset of the COVID-19 pandemic, this surge is being driven almost entirely by escalating geopolitical tensions over tariffs. See chart 3