After two days of consolidation, the Indian equity market witnessed a correction on June 29 with the Nifty50 breaking crucial 10,300 mark.
The broader market was below benchmark indices as Nifty Midcap and Smallcap indices were down 1.8 percent each. These indices had been outperforming benchmark indices in the recent rally.
Here are five key factors that are weighing on the market:
Asian equity markets remained under pressure as investors worried about the re-opening of economies following a rise in COVID-19 cases. Japan's Nikkei fell more than 2 percent after a 12.3 percent YoY drop in retail sales in May 2020.
South Korea's Kospi also slipped more than 2 percent each, while Hong Kong's Hang Seng declined 1.4 percent and Australia's ASX 200 dropped 1.8 percent.
China's Shanghai Composite was down 0.77 percent at the time of writing this copy.
COVID-19 cases rising
Globally, investors remained concerned about the sudden spike in COVID-19 cases in the last couple of weeks. Death count worldwide crossed 5 lakh with more than 1 crore reported cases.
The US reported more than 40,000 cases per day in the last three 3 days, which is a big concern when countries are considering re-opening the economies. Brazil has also reported 30,000-40,000 cases per day for a week now.
India reported more than 19,000 cases a day for the first time on June 28, taking total infections count to over 5.4 lakh with more than 16,000 deaths.
Lockdown continues, doubts over Unlock 2.0
In states like Maharashtra, Andhra Pradesh, West Bengal, Karnataka, Tamil Nadu, Delhi, containment zones increased sharply as the number of COVID-19 cases continued to rise. This has put a big question mark as to when these key states would lift the lockdown.
Few states like Jharkhand and West Bengal already said the lockdown will continue till July 31, while Delhi said schools will remain shut till July 31. Maharashtra government also said the lockdown would not be lifted after June 30 given the rising cases, though there could be further relaxations.
Experts feel there could be further relaxations in all non-containment zones in Unlock 2.0 which is expected to start from July 1, but people seem reluctant to travel given the rising cases.
All sectoral indices, barring FMCG and Pharma, traded in the red. Nifty Bank, Auto and Financial Services indices were down over a percent each, while Metal and Realty plunged 3 percent each.
The Nifty50 witnessed volatility with a positive bias and has been forming a small-bodied bearish candle on daily charts so far in Monday's trading session.
Experts expect the volatility to continue and if the index breaks 10,200, there could be further selling pressure.
"Unless we do not cross or break on one side, we will be sideways for the week. While the underlying tone still seems bullish, we would need to concentrate on the 10,200 level which if broken can drop to levels closer to 10,000. On the upside, we need to go past 10,450 on closing and then the target could be 10,700," Manish Hathiramani, Proprietary Index Trader and Technical Analyst at Deen Dayal Investments said.
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