Last week, China ordered the US consulate in Chengdu to be closed, in retaliation for the US closure of the Chinese consulate in Houston following spying allegations.
On the coronavirus front, India's overall cases tally climbed to 13,85,522 and the death toll from the virus infection rose to 32,063 on Sunday, official data showed.
Globally, the number of COVID-19 cases has topped 1.6 crore and the death toll reached close to 6.5 lakh.
"Record virus infections in India have also unsettled investors, with its related delay in business and earnings recovery. Global markets were also affected on account of rising US-China tensions. Any further developments in this front will impact trade this week," said Vinod Nair, Head of Research, Geojit Financial Services.
On the corporate earnings side, Kotak Mahindra Bank, Tech Mahindra, HDFC and Reliance Industries are among the companies to file their quarterly financial results this week. Another major event that markets would track is the Fed interest rate decision on Wednesday.
Last week, the BSE Sensex logged gains of 1,109 points or 2.99 per cent and the NSE Nifty rose 292 points or 2.68 points.
"Investors will keep a close eye on the upcoming earnings commentary, US-China escalation, impact of coronavirus on the economy and development on vaccine," said Sumeet Bagadia, Executive Director, Choice Broking.
Also, crude oil movement and rupee-dollar trend would be monitored by investors, analysts said.
Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd, said, "After the recent spike in Nifty, market is expected to consolidate for a couple of days, given flaring US-China relations and persistent rise in virus cases. Thus, the market volatility is likely to continue."
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