Markets Recover after Ratings Rock the Boat

Globally, the equity markets displayed increased volatility in the past week and this trend was also evident in India. The India VIX, a metric reflecting investors’ anticipation of short-term market volatility, observed an abrupt surge of over 10 per cent. This unexpected escalation can be traced back to Fitch, a prominent rating agency, which downgraded the rating of US’ government debt from its previously pristine top-tier status. This occurrence marks the second instance of such a downgrade, following the precedent set by S&P in 2011.