Honsla. Eendhan. Badla.

A Year Later — The Sequel Nobody Was Ready For

“Ek baar jo maine commitment kar di, toh main apne aap ki bhi nahi sunta.” (Once I make a commitment, I don’t even listen to myself.) — Volatility in 2026.

When we last left our hero — the India VIX — it was April 2025. Tariffs were raining from Washington. The CBOE VIX had spiked to 45%. The volatility spread between India and the US had blown past every statistical boundary. We said: “Picture abhi baaki hai mere dost.”

We had no idea just how right we were.

Eleven months later, the credits still haven’t rolled. Pull up a chair. The second part just got interesting.

Act 1: When Wall Street Forgot India Exists

In normal markets, this spread lives in positive territory. That’s the natural order — EM fear runs structurally hotter than DM fear. India VIX above CBOE VIX, as it should be.

Volatility spread between INDIA VIX & CBOE VIX

Then comes a shock big enough to flip the script entirely. The Tariff Policy shock of April 2025 drove the spread to below negative 31.89 points, below negative six standard deviation. A reading so extreme it means one thing: the CBOE VIX exploded so violently that it didn’t just close the usual EM premium, it obliterated it and ran another 31 points.

India wasn’t the story. India was the background character. Wall Street was the one having the full Bollywood breakdown. And the only comparable moment in the entire dataset? COVID at negative 34.31 points. The Tariff shock was just about the hit this level.

This is the context that matters: around two and half points separated a trade policy announcement from a global pandemic in terms of raw volatility dislocation. Not a near-miss, a statement about how violently the US options market reprices tail risk when Washington turns chaotic.

India VIX moved too. But relative to what CBOE VIX did? Dalal Street was watching the fire from across the street while Wall Street was inside the building.

Act 2: Was India VIX Cheap, Expensive or Just Confused?

The subplot that keeps giving.

Recall Act 2 from April 2025: India VIX was sitting at the 75th percentile, elevated, but not screaming. Realized vol at 12.82% was barely below implied at 13.76%. The IV-RV premium was a whisper at 0.94 points.

The verdict then: cheap relative to what was actually happening.

IV–HV Spread

Here’s the twist the sequel delivered. While the CBOE VIX was setting near-COVID records and the spread was cratering into negative territory, India’s own implied-realized relationship was telling a far quieter story. India VIX did rise, but it never decoupled from realized volatility the way CBOE VIX did from US realized volatility. The premium stayed contained.

Translation: Indian options traders priced fear proportionally. American options traders priced panic. That’s not a small distinction — it’s the difference between a market that’s nervous and a market that’s pricing the apocalypse.

Fast forward to March 2026. The IV-HV spread has normalized. Implied and realized volatility have converged back toward each other. The theatrical premium that briefly existed has been fully arbitraged away by time and mean reversion.

For traders who bought India volatility in April 2025 when it was cheap relative to US volatility — they got paid. For those who chased CBOE VIX at 45 expecting India to follow suit at the same magnitude — the market handed them a lesson in basis risk.

Act 3: The Box Office Report — 2025 in Historical Context

Every year gets a box plot. Every box plot tells a personality.

2020 is the obvious outlier — whiskers reaching for the sky, interquartile range bloated by month after month of elevated fear. That’s the COVID year. The superstar of volatility cinema.

Volatility Ranges 2010–2025

But look at 2025.

The median is elevated. The upper whisker is extended. The outliers are plentiful. 2025 doesn’t have the raw India VIX peak of 2020 — because in 2025, the fear was largely a US story. What 2025 has instead is breadth. Volatility wasn’t just a spike — it was a sustained elevated regime driven by multiple acts: the tariff shock, geopolitical noise, global growth slowdown fear.

In the volatility box office, 2020 was the blockbuster that opened at number one and then fell off a cliff. 2025 is the slow-burn thriller that kept audiences in their seats for months.

For long India vol traders, 2025 delivered — selectively. For short vol traders who survived, it was tuition. For cross-market volatility traders who understood the India-US basis, it was the year that paid.

Act 4: The Mean Reversion Redemption Arc

India Volatility Index

The final chart comes with a three-line truth serum: +1SD, +3SD, and +11SD.

The +11SD line is almost a joke, except it isn’t. That’s the COVID spike. The single moment in India’s recorded volatility history where fear went so parabolic that eleven standard deviations didn’t even feel like an exaggeration. It sits on the chart as a permanent reminder that markets can go places no model anticipates.

Then there’s the line that actually matters for active traders: +3SD at 35.73. Statistically, a three-sigma event is supposed to be rare. In volatility markets, it’s the threshold between “elevated” and “something is genuinely breaking.” India VIX has pierced that line only a handful of times.

And here’s what makes 2025 remarkable in a completely different way: it was hovering around +1SD. Despite the tariff shock, despite the CBOE VIX marching past +3SD levels, despite the spread collapsing to negative 31 points, India VIX held below the +3SD ceiling the entire time. Dalal Street stayed within statistical bounds while Wall Street was rewriting them.

That’s not weakness in the India VIX reading. That’s the story. India was the composed co-star while the US lead actor was chewing the scenery.

As of March 20, 2026, India VIX sits comfortably below even the +1SD band — the ordinary zone of mild market anxiety. Full reversion. The calm that follows a storm that, by India’s own measure, was never truly a storm.

The question for 2026 isn’t whether volatility will spike again. It has. The war conflict fears of March 2026 saw to that — a completely different trigger, same volatility machinery. Tariffs woke the market up in 2025. Geopolitics reminded it in 2026 that there’s always a next act. The question is whether you’re positioned for it or whether you’re the audience member who walked out during the intermission and missed the second half.

Final Frame: One Year On

“Picture abhi baaki hai” was a prediction disguised as an observation.

The picture did indeed continue, twice over! The Tariff shock of April 2025 drove the INVIX-USVIX spread to negative 31, a reading only COVID at negative 34 has ever surpassed. India VIX, to its credit, never breached +3SD. It hovered around +1SD while CBOE VIX was rewriting statistical boundaries. The IV-RV story played out exactly as anticipated: India vol was cheap, it delivered, then it normalized.

Then March 2026 arrived with a completely different script. Not tariffs. Not trade policy. War. Geopolitical risk of the oldest kind and volatility didn’t need a second invitation.

Two shocks. Two separate causes. One consistent lesson: the regime we are in does not reward complacency. The volatility surface doesn’t care whether the trigger is Washington or the Middle East. It just prices fear.

And now the credits still won’t roll.

Agli baar phir milenge.

💡 TL;DR:

• The April 2025 Tariff shock collapsed the INVIX-USVIX spread to negative 31, only COVID’s negative 34 has gone further.
• India VIX never breached +3SD. It hovered around +1SD. CBOE VIX was the one rewriting the boundaries.
• India IV-RV stayed proportional throughout. US options markets priced panic; India priced concern.
• 2025 was sustained elevated vol, breadth over peak.
• March 2026 delivered a fresh spike. This time Iran, not tariffs. Different trigger, same machinery.
• The movie is not paused. It is still running.

Backstage, as always: quantmod — because in this business, vibes don’t pay the premium.

Originally published at https://kannansi.substack.com on March 22, 2026.