Global cues pull down indices as Nifty retests 9,700: 5 factors weighing on D-Street

It looks like a freaky Friday in the making. The S&P BSE Sensex plunged more than 1,000 points to break below its crucial psychological support at 33,000 while Nifty50 breached 9,700 at open.

Sectorally, selling pressure was seen in bankex, finance, capital goods, metals and auto index.

At 09:20 AM, the S&P BSE Sensex was down 925 points at 32,613 while the Nifty50 was down 244 points at 9,657.

The sell-off on Wall Street and the weak trend seen in Asian markets will have a rub-off effect on the Indian markets as well. The three major US stock indexes fell more than 5%, posting their worst day since mid-March. US markets posted their biggest one-day loss since March 16.

Crude oil prices also fell over growing concerns of the second wave of COVID-19 as well as gloomy economic outlook at the end of its two-day monetary policy meeting on Wednesday said a Reuters report.

The Dow Jones Industrial Average fell 1,861.82 points, or 6.9 percent, to 25,128.17, the S&P 500 lost 188.04 points, or 5.89 percent, to 3,002.1 and the Nasdaq Composite dropped 527.62 points, or 5.27 percent, to 9,492.73.

Fear of a second wave of COVID-19 related cases has sparked worries among investors that it would delay the economic recovery.

About half a dozen states including Texas and Arizona are grappling with a rising number of coronavirus patients filling hospital beds, fanning concerns that the reopening of the U.S. economy may spark a second wave of infections, said a Reuters report.

India is now among the five countries most affected by the outbreak, with over 2.8 lakh infections and more than 8,000 deaths. Globally, there have been over 75 lakh confirmed cases of COVID-19, and more than 4.2 lakh people have died so far.

India’s economy could contract by as much as 7.3% in FY21 if the second wave of coronavirus sweeps the country, requiring reinforcement of containment and social distancing measures, Organisation for Economic Co-operation and Development (OECD) said, a media report quoted.

The Nifty50 managed to hold above 9900 levels on Thursday, but a breakdown below 9840 could take the index towards 9700 levels, suggest experts.

“Currently, the index is hovering around its support of previous swing high of 9889 levels. Also, we are witnessing Bullish AB=CD pattern on an hourly scale around 9840 levels,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services Limited told Moneycontrol.

“Thus, there is a possibility of a bounce from 9840 - 9889 zone, however a hold below the same would be negative for the index towards 9777 zones. On the flipside, resistance is now placed at 10040 then 10150 zone,” he said.

Foreign institutional investors which were mostly net buyers so far in June turned net sellers in the last two trading sessions.

FIIs have pulled out Rs 919 cr on 10 June, and Rs 805 cr on June 11 in the cash segment. But, overall for the month of June, FIIs still remain net buyers to the tune of more than Rs 13000 cr while DIIs remain net sellers.

“FII’s had sold off in March and it is early days yet to determine whether the trend is changing. The country does need FII flows to support local risk capital. FII’s will come to India since India continues to show possibilities of growth given low penetration levels,” Sameer Kaul, MD & CEO, TrustPlutus Wealth Managers (India) told Moneycontrol.