Weekly Market Commentary

Nepse finish week higher despite sharp pullback

Published On: June 19, 2021 07:04 PM NPT By: Republica  | @RepublicaNepal

KATHMANDU, June 19: Stretching the gaining streak, the Nepal Stock Exchange (Nepse) opened week on a firmly bullish note. With gains of 38.33 points and 42.72 points in Sunday and Monday’s trading session on the back of record volumes, the index hit a fresh closing high at 3,025.83. The market lost some steam at mid-week, with the index losing a modest 3.72 points. However, a sharp plunge ensued following Sebon’s listing of 51 companies deemed overvalued by the regulator on Tuesday evening. The circular brought Nepse’s rally to a screeching halt with investors reacting to the news with broad selling pressure. The benchmark tanked 52.39 points on Wednesday. On Thursday, stocks witnessed high volatility but lost a modest 1.30 points. Nepse capped eventful week at 2,968.42 points – up 23.64 points or 0.8% against the week earlier. 

The advance in the review period also marks a seventh straight week of gain in the equity market, where the bourse has climbed more than 350 points. The stock market has continued to see notable upward movement since the introduction of the prohibitory orders in the country. Low interest rates, excess liquidity, and a halt in most of the business activities have helped the index make fresh highs. The equity market has seen active participation of late with new entrants contributing to huge rise in volumes. However, some pessimism was seen of late amidst Sebon’s cautionary statements urging investors to make prudent decisions backed by proper analysis while making investments in the equity market. Average daily turnover stood above Rs. 16 billion. 

Class ‘A’ stocks outperformed the broader market, with the gauge Sensitive Index advancing 2.58%. Sectors ended mixed with gains coming mainly from Hotels & Tourism sector and Investment sector. The groups’ sub-indices jumped more than 5%. Banking sub-index and ‘Others’ sub-index rose 1.78% and 1.12%. Manufacturing & Processing and Development Bank sectors also eked out moderate gains. 

On the other side of the spectrum, Trading sector tanked sharply registering a decline of more than 4 %in the week on review. Life Insurance and Hydropower segments also tanked more than 2%. Finance segment fell 1.10%. Mutual Fund, Non-Life Insurance and Microfinance sectors also ended marginally lower.

On the weekly technical front, the index formed a doji candlestick suggesting indecision in the weekly timeframe. SImilary, long wicks in the candlestick indicate high volatility prevailing in the week pointing towards uncertainty in the equity market for the short run. Nonetheless, volumes have remained upbeat making a deep correction unlikely. 2,900 mark can be taken as a strong psychological level where the index’s movement will be crucial in gauging the possible movement of the market. 

This column is produced by ARKS Capital Advisors Ltd.


(Views expressed in the article are those of the producer and do not necessarily reflect those of this publication)

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