Daily Commentary: Nepse snaps 7 day winning run with a modest correction

Published On: July 21, 2020 07:39 AM NPT By: Republica  | @RepublicaNepal

Benchmark index falls 14 points   

KATHMANDU, July 20: Despite opening the day almost 4 percent higher after pre-opening session, the Nepal Stock Exchange (Nepse) benchmark index failed to sustain the early gain towards the closing hours. The index hit the first upper circuit limit of 4 percent within a couple of minutes of trading, triggering a trading break of 20 minutes. After resumption of the trading, the index hit its subsequent upper limit of 5 percent and forced another trading halt.

However, as trading restarted, the benchmark failed to hold on to its morning gains and witnessed a steady decline in the afternoon. Nepse retraced 14.09 points, or 0.95 percent, to settle at 1,464.94 points.

The monetary policy announcement saw the index add on to its earlier advance to close Sunday’s trading notably higher. Consequently, following an accumulated gain of over 150 points in 7 sessions, the volatile trading finally gave way to the sellers pushing the index slightly lower. Meanwhile, a massive increase in volume suggests heavy profit booking in the secondary market. Over Rs 2.8 billion worth of stocks changed hands on the day.

Sectors maintained negative bias as most closed in red. Only Development Bank, Banking, Finance and Mutual Fund sub-indices ended the day higher. Hotels stocks succumbed to selling pressure, shedding 4.47 percent. Manufacturing & Processing and Trading sub-indices also came under pressure and fell over 4 percent each. Sub-indices of Microfinance, ‘Others’, Life Insurance and Hydropower also edged lower.

NMB Bank Ltd’s shares were heavily traded. The scrip registered a turnover of over Rs 201 million. Besides, Nepal Reinsurance Company Ltd and NIC Asia Bank Ltd saw transactions of over Rs 170 million apiece. Nepal Life Insurance Company Ltd, Nabil Bank Ltd and Global IME Bank Ltd were the other actively traded stocks.

Three companies remained locked in the upper trading limit of positive 10 percent. United Finance Ltd, NIC Asia Laghubitta Bittiya and Sparsha Laghubitta Bittiya Sanstha Ltd rallied almost 10 percent each. Similarly, Himalaya Urja Bikas Company Ltd and Rastriya Beema Company Ltd Promoter Share ended up by over 8 percent. ICFC Finance Ltd, Gurkhas Finance Ltd and Kalika Power Company Ltd followed suit with gains of over 5 percent each.

Conversely, shares of Gurans Laghubitta Bittiya Sanstha Ltd and Manjushree Finance Ltd suffered notable losses. Both went down by almost 10 percent. Shivam Cements Ltd fell 8.89 percent and Forward Community Laghubitta Bittiya Sanstha Ltd dropped 8.67 percent. Grameen Bikas Laghubitta Bittiya Sanstha Ltd, Nadep Laghubitta Bittiya Sanstha Ltd and Soaltee Hotel Ltd tumbled around 7 percent each.

As per ARKS technical analysis, the Nepse index formed a bearish candlestick reflecting sellers’ dominance in the equity market. However, the pullback can be taken as a correction only unless it is followed by another bearish candlestick breaking 1,400 points psychological mark to the downside. Relative Strength Index (RSI) shows some more room for the market to climb higher. Moving Average Convergence Divergence (MACD) is also sloped upwards in the positive territory suggesting short term uptrend still in action.

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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