Daily market commentary

Nepse closes in green after two-day slump

Published On: March 4, 2020 09:03 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU: After sliding more than 50 points in the initial trading hour, the Nepal Stock Exchange (Nepse) index staged a massive recovery recouping all of its morning losses to trade roughly 30 points higher within the first trading hour. The index then gyrated between gains and losses on volatile trading day but largely maintained positive bias. At Tuesday's close, the index stood at 1,509.67 points, up 14.37 points against Monday's session.

Following a two-day correction where the index gave up more than 130 points, the index took a breather as bulls finally gained some control of the equity market. Despite most sectors recouping previous day decline, heavy losses among microfinance sectors kept the day's gain in check. Microfinance segment slid on the directive by Nepal Rastra Bank (NRB) in the half yearly monetary policy review that requires micro sector lenders to separate funds from dividends in excess of 20% mark. 25% of the excess dividend amount is to be allocated for Corporate Social Responsibility (CSR), while another 25% needs to be separated for Consumer Protection Fund (CPF). Nonetheless, investors continued to absorb the broad selling pressure with more than Rs 3.85 billion worth of securities traded on the day.

Most of the sectors saw green. Leading the gains, Non-Life Insurance segment recouped 2.54% while Mutual Fund sub-index added 2.49%. Life Insurance sector also saw strength and advanced 2.21% on the day. Heavyweight banks, among others, helped the Nepse index close in green with the group's sub-index rallying 1.72%. Manufacturing & Processing, Finance and Development Bank sub-indices also closed the day firmly higher. Conversely, Microfinance sector slumped 4.61%. Trading and 'Others' sectors also closed the day lower.

Shares of Nepal Life Insurance Company Ltd continued to see active market participation as more than Rs 405 million worth of the equities changed hands. NMB Bank Ltd and NIC Asia Bank Ltd were the other active stocks with turnovers of Rs 250 million and Rs 183 million, respectively. Himalayan Distillery Ltd registered a turnover of Rs 142 million, while Nabil Bank Ltd, Everest Bank Ltd and Global IME Bank Ltd posted turnovers of Rs 129 million, Rs 103 million and Rs 95 million. 

Two stocks remained locked in the upper circuit. Manjushree Finance Ltd saw its share price rally 9.92% while shares of Nepal Hydro Developers Ltd rose 9.27%. United Insurance Company Ltd, Neco Insurance Company Ltd and Everest Insurance Company Ltd were the other major gainers with roughly 6% advances each. NMB Hybrid Fund L-1, Sagarmatha Insurance Co Ltd and NLG Insurance Company Ltd were among other major gaining scrips.

On the other hand, decliners list remained dominated by microfinance stocks. Swadeshi Laghubitta Bittiya Sanstha Ltd posted the biggest loss of the day and tanked 10%. NMB Microfinance Bittiya Sanstha Ltd, Sparsha Laghubitta Bittiya Sanstha Ltd and Samudayik Laghubitta Bittiya Sanstha Ltd closely followed with losses of over 9% each. Gurans Laghubitta Bittiya Sanstha Ltd, Swabalamban Laghubitta Bittiya Sanstha Ltd and Chhimek Laghubitta Bikas Bank Ltd also suffered and shed over 8% each.

On the technical front, the market finally found some footing after massive correction witnessed in the beginning two sessions of the week. As a result, the market formed a small bullish candlestick with long wicks on either side. The long wicks caused due to market volatility, suggests that some indecision still prevails in the equity market. In the afternoon, the index rebounded from its 20-day Exponential Moving Average (EMA) at around 1,450 points, which can act as a support for the near term. If the market manages to extend gains in the coming sessions, the index will likely test its resistance at around 1,630 points. The movement around the aforementioned level will be crucial in gauging further direction of the equity market. 

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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