Weekly market commentary

Nepse erases early gains to close week in red

Published On: January 25, 2020 12:24 PM NPT By: Republica  | @RepublicaNepal

KATHMANDU: Local stock kicked off the week on a remarkably positive footing as the Nepal Stock Exchange (Nepse) index rallied over 33 points on Sunday. However, the index pulled back sharply on Monday sliding over 26 points. While Tuesday was marked by a 3-points gain, equities came under pressure on Wednesday and Thursday. The major average extended its decline with consecutive losses of 7 points and 16 points in the respective sessions. Overall the index closed the week down 12.76 points or 0.97% at 1,297.47 points.

The Nepse index which added almost 100 points in the week earlier, witnessed a modest correction mainly on the back of profit booking seen in most of the traded sectors. The rally which began in the month of December lost some steam in the review period with investors slightly holding back on taking long positions. This is also partly because of the index trading around its yearly highs. On a more positive note, market participation is at its all-time high level. This week the bourse posted a record turnover of over Rs. 8.5 billion.

Class 'A' stocks also gave ground and mirrored the broader index's movement. Sensitive Index sank 1.47%. Most of the sectors remained affected by broad profit booking. Trading sub-index tanked 9%. Hotels stocks also struggled as the group's sub–index fell more than 3%. Hydropower and Microfinance sectors posted losses of over 2% each. Weighing on the Nepse index heavily, Banking sub-index also closed the week 2% lower. All other sectors ended the week in negative territory. Insurance sectors bucked the trend as Life Insurance and Non-Life Insurance sub-indices rallied more than 7% and 4%, respectively. Mutual Fund and Finance sub-indices also closed the week marginally higher.

Shares of Global IME Bank Ltd registered a massive weekly turnover. More than Rs. 806 million worth of the commercial bank's shares changed hands as trading of the respective scrips resumed following merger with Janata Bank Nepal Ltd. Next, shares of Nepal Life Insurance Company Ltd and Himalayan Distillery Ltd logged in turnovers of roughly Rs. 480 million apiece. NIC Asia Bank Ltd, Shivam Cements Ltd and Nepal Bank Ltd were among other active scrips in the week on review.

With the end of second quarter, few commercial banks and microfinances have begun publishing their earnings. So far, micro sector lenders' performances have been firmly upbeat with most reporting substantial year-on-year growths in their after tax profits. However, commercial banks financials remain slightly subdued owing primarily to higher cost of funds and persisting liquidity crunch seen in the past couple of years. Nonetheless, the liquidity situation in the economy is gradually showing signs of easing, which can act as an impetus for the commercial banks to better their performance in the upcoming quarters.

On the ARKS technical analysis front, the market formed a long wick bearish candlestick on the daily time frame as the index pulled back after reaching its 20-month high on Sunday. Weekly Relative Strength Index (RSI) has also reverted from its upward direction which suggests the market losing some momentum. Nonetheless, the dip can only be taken as a correction as long as the index hovers above support zone of 1,280-1,300 points. Hence, investors are suggested to watch these key levels to gauge possible movement of the equity index in the coming weeks.

This column is produced by ARKS Capital Advisors Ltd
(Views expressed are those of the producer and do not necessarily reflect those of this publication)

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