After a second wave of coronavirus infection gripped the US and China and cases in India are on the rise, stock markets are once again on the selling spree. And Chris Wood has even said that markets may again retest March lows if corona scare continues. Notably, in trade on June 15, 2020 dived over 2% to day's low of 9726 points, while Sensex was dragged to 32,923.74.
The broader markets however fared better with the S&P BSE Midcap index down more than 1% and S&B BSE SmallCap Index trading almost steady.
Here are the four factors which is dragging headline indices lower:
1. Rising Covid 19 cases:
India for three consecutive has been adding over 11000 Covid 19 positive cases with 333008 cases and death toll has reached 9500. As per an ICMR research report, the infection may peak in mid-November. It may then that isolation beds and ICU, ventilators may become insufficient.
Globally there is a second wave of coronavirus infection with Beijing recording cases after 2 months time. On a global level, 0.1 million cases are being known every single day.
2. Weak economic indicators:
Though the usual IIP data has not been released, figures released on Friday point to IIP for April contracting by the highest ever of 55.5% on total halt in economic activities. Also, most industries reported nil production and suggested that current data should not be compared with previous data.
Also, WPI as released today shrank by 3.21% for the month of May. The detailed data has been released after one month suspension on the same due to coronavirus led lockdown situation
3. Financials took a beating:
All the major index from the financial space were down up to more than 4% in trade today. Further, the SC verdict on AGR dues which is to be heard by the court on June 18 will have a bearing on bank stocks which have ample exposure to telecom names. Also, the SC's say on waiver on interest on loan in moratorium also holds importance for banks. In the previous hearing, the Supreme Court said the complete waiver is not under consideration and the scope shall be limited to interest being levied on deferred interest.
4. Weak global markets:
As the coronavirus second wave gripped world markets, oil and stock indices world over tumbled as risk-off sentiment took over. Besides Asian markets, European markets also opened weak with the Stoxx 600 opening lower by over 2% lower. Futures on the Dow Jones are down over 830 points that is suggestive of heavy sell-off once the trading resumes.