Historically, this has not been the case. But over the last one month, ever since President Trump announced his liberation day tariffs, the US stock market has been twice as risky as the Indian stock market. Meanwhile, risk has gone up in both markets, which is bad news for everyone.
First, how do we measure and compare risk? Here, we turn to the options market. The VIX index, calculated from option prices, measures the expected volatility (or risk) of the S&P 500 stock index in the US. The India or Nifty VIX, also calculated from option prices, is a comparable measure for the Nifty Index.
These indices tell us about the riskiness of the market. The higher the index, the greater the level of risk. The chart below shows the two indices over the last one year.
It is clear that the US stock market has been at a similar risk level to the Indian market for most of the last year. Indeed, between May 2024 and March 2025, the India VIX averaged 15.0, compared to 16.8 for the US VIX. But in April 2025, this relationship broke down. Since then, the India VIX averaged 16.8, compared to 33.4 for the US VIX. From these, we conclude two things:
First, the US stock market is now much riskier than the Indian market.
Second, both markets are riskier than they were before.
What does a higher level of market volatility mean for the economy? Higher volatility means greater economic uncertainty. Most of us have no idea what the final US tariffs will be. And because we don’t know, we are more uncertain about business’ profits. And we are more uncertain about their stock prices. And hence the high levels of the VIX indices.
Is the uncertainty itself bad news? Yes, absolutely. Imagine a business deciding whether to invest today or wait one year? If this business is unsure about the future economic landscape (e.g. tariffs on its products), it makes sense to wait. Now imagine a consumer deciding on making a big purchase, such as a car. Buy today, or wait one year? If that consumer is worried about losing his job, because his employer is delaying investment plans, the consumer is better off waiting too. And so, everybody waits, and economic activity goes down. And this happens even if the tariffs end up not going ahead.
Let’s go back to the numbers on the VIX indices. As we discussed, the US market is now riskier and more uncertain than the Indian market. This means that the tariff induced uncertainly is going to have the biggest negative effect on the US economy, relative to India (and other countries). As we also discussed, both markets are riskier than before. This means that Indian economy will also be negatively affected.
Now, market expectations can be wrong. Individual investors may disagree with the market view (if this is you, then try to look for a trading opportunity). Nonetheless, there’s immense value in understanding the story the market is telling us.
Asad Dossani is an assistant professor of finance at Colorado State University. His research covers derivatives, forecasting, monetary policy, currencies, and commodities. He has a PhD in Economics. He has previously worked as a research analyst at Equitymaster, and as a financial analyst at Deutsche Bank.
Note: The purpose of this article is to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly encouraged to consult your advisor. This article is for strictly educative purposes only.
Disclosure: The writer or his dependents do not hold any of the assets discussed in this article