Daily Commentary

Stocks pull back sharply ahead of a week-long lockdown

Published On: August 19, 2020 08:05 PM NPT By: Republica  | @RepublicaNepal

Nepse benchmark index dives 17 points 

KATHMANDU, Aug 19: Local stocks maintained negative bias throughout Wednesday’s trading session to close the day firmly in red. After tanking sharply in the opening minutes, the benchmark Nepal Stock Exchange (Nepse) index tried to gain ground in the first trading hour. Nonetheless, sellers prevailed in the latter part of the session pushing the index 16.6 points lower at 1,391.29 points. 

Even though some strength was visible in the prior session as investors tried to look past earnings decline, the news of another lockdown in the city weighed heavily on the stock market. Consequently, Wednesday’s session saw all sectors suffer losses. Investors remain apprehensive to take major long positions on the day. While the stock market will remain open during the lockdown, market activity will likely take a hit with restricted movements and only a portion of investors availing online trading services. On Wednesday, turnover remained just shy of Rs 1 billion.

Insurance segments were the major laggards, with Non-Life Insurance and Life Insurance sub-indices tumbling 1.66 percent and 1.59 percent, respectively. Manufacturing & Processing and Trading segments also suffered heavy losses with both shedding around 1.5 percent each. Heavyweight banks, meanwhile, fell 1.27 percent. All other segments closed the day lower. 

Among actives, shares of Citizen Investment Trust saw notable turnover with over Rs 80 million worth of the scrips being traded. Nepal Reinsurance Company Ltd and Neco Insurance Ltd followed suit with transactions of over Rs 60 million each. Nepal Life Insurance Company Ltd, Sadhana Laghubitta Bittiya Sanstha Ltd and NIC Asia Bank Ltd were the other top turnover scrips of the session. 

Samriddhi Finance Company Ltd saw the biggest percentage gain of the day. Its share price rallied 10 percent. The Class ‘C’ financial institution received approval from Nepal Rastra Bank (NRB) to issue 200 percent rights. Energy stocks followed suit. While Panchakanya Mai Hydropower Ltd shot up by 5.13 percent, Chhyangdi Hydropower Ltd and Union Hydropower Ltd rose 3.45 percent apiece. Sadhana Laghubitta Bittiya Sanstha Ltd also jumped 3.32 percent. 

In contrast, shares of Prudential Insurance Company Ltd struggled and shed 3.8 percent. Miteri Development Bank Ltd also sank 3.26 percent. Meanwhile, other major losing scrips include Himal Dolakha Hydropower Company Ltd, Rairang Hydropower Company Ltd and Arun Valley Hydropower Company Ltd, which closed over 3 percent lower each. 

On the technical front, the index formed a bearish candlestick erasing two days’ gains. Consequently, a drop below 1,400-point mark signifies bears in control in the present context. Technical indicators also suggest slightly bearish sentiment prevailing of late. Further drop can see the index test a crucial support level at around 1,350-1,360 points level. A rebound with volume at the respective level might give buying opportunities, while a breach of that support can see the index extend its short term downward movement.

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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