Daily Commentary: Stocks trim previous day losses

Nepse benchmark index up 11 points

KATHMANDU, Aug 17: After opening slightly higher in the morning, the Nepal Stock Exchange (Nepse) index pulled back towards the red to trade over 6 points lower at mid-day. However, the latter trading hours saw the index make a steady recovery to hover flat in the afternoon. A last hour surge finally helped the index register a gain of 10.75 points to close at 1,402.21 points.

After back-to-back losses, the index is now consolidating around 1,400-point level. Despite the index trading around 80 points lower from July’s closing high of 1,479 points, it found good support at around 1,360-point level. Hence, the index has largely remained range bound while witnessing some volatility. While pandemic fears and earnings drop has put the index under pressure, lower interest rates and higher liquidity have been driving forces to keep the market afloat firmly higher above the recent low of 1,200 points. Meanwhile, turnover remains upbeat with over Rs 1 billion worth of shares being traded in almost every session.

After most of the non-life insurance companies reported upbeat earnings for the year 2019/20, investors are taking major buying positions in the respective stocks. The sub-index led the day’s rebound with a gain of 2.46 percent. ‘Others’ and Life Insurance segments also witnessed notable upward movement closing over 1 percent higher each. All other sectors closed the day in green, barring the hydropower segment, which witnessed a modest drop.

Nepal Bank Ltd has been the go-to stock off late for many investors who are looking to invest in commercial banks. Its relatively higher earnings as compared to its market price and possibility of decent dividend distribution among other banks have provided an impetus to the banks scripts. Over Rs 78 million worth of the bank’s shares changed hands on Monday.

Nepal Reinsurance Company Ltd closely followed with a turnover of Rs 66 million. Neco Insurance Ltd and Nepal Life Insurance Company Ltd, meanwhile, registered turnovers of Rs 57 million and Rs 45 million, respectively. Global IME Bank Ltd, NMB Bank Ltd and Kumari Bank Ltd were among other active stocks.

Sadhana Laghubitta Bittiya Sanstha Ltd continued to lead the advances with a gain of almost 10 percent. Energy stocks, Ghalemdi Hydro Ltd and Joshi Hydropower Development Company Ltd also saw considerable strength and rose around 7 percent apiece. Support Laghubitta Bittiya Sanstha Ltd, Premier Insurance Company Ltd and Neco Insurance Ltd posted advances of 6.6 percent, 5.86 percent and 4.13 percent, respectively.

Meanwhile, a few hydropower stocks struggled notably. Chhyangdi Hydro Ltd, Dibyashwori Hydropower Ltd and Union Hydropower Ltd led the losses. While the former sank 4.4 percent, the latter two fell 3.64 percent each. Nirdhan Utthan Laghubitta Bittiya Sanstha Ltd tumbled 2.71 percent, after the micro sector lender reported a notable drop in its earnings for the fiscal year 2019/20. Ngadi Group Power Ltd, ICFC Finance Ltd and Mithila Laghubitta Bittiya Sanstha Ltd shares also came under pressure.

As per the ARKS technical analysis, the index formed a small bullish candlestick on the daily timeframe but remained confined within previous day’s high and low points. Hence, some indecision is visible in the present context. Technical indicators also reflect neutral sentiment in the current juncture. A strong support lies at 1,350-1,360 points, while the index may face resistance at around 1,440 point’s mark.

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)