Weekly Market Commentary

Nepse ends in red for third straight week

Published On: March 21, 2020 10:55 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU: Substantial weakness was visible in the equity market in the start of the week's trading. The Nepal Stock Exchange (Nepse) index tanked over 64.14 points on Sunday as investors continued to flee the secondary market. The selling pressure eased of slightly on Monday as the bourse gained some footing with a 3.36 point gain. Nonetheless, heavy losses continued with Tuesday, seeing a decline of 44.33 points and Wednesday, following with a 16.27 points drop. A gain of 13.5 points helped the benchmark index trim its week's losses but that could not prevent the index from maintaining a notable negative bias. Loss tally in the review period stood at over 107.88 points or 7.83% as Nepse closed at 1,269.31 points.

The decline in the review period marks a third straight week where the index ended lower. Consequently, the major average is in the verge of posting its worst month ever as the index has recorded a drop of over 360 points since the start of March. Investors still remain skeptic over the impact of COVID-19 outbreak while the national government has started taking precautions against the disease in the country. In the week, the government ordered shutting down of gyms, clubs, movie theatres and alike to curb any possible spread of the disease. Similarly, the government has also discouraged gathering of more than 25 people in one place at a time. 

For the equity market, Sebon has ordered broker houses to stop displaying live prices and also limit the number of visitors to a maximum of five people at a time. Further, online trading and trading via phone calls has been encouraged. In such a scenario, the local bourse might see some drop in volumes. Speculators are expecting a temporary shutdown of the equity market, but no official word is out from the concerned bodies yet. Total turnover in the week was Rs 8.27 billion. 

Sensitive index, gauging the price of Class 'A' stocks, mirrored the broader index and dropped 7.34%. Taking the hardest hit, both insurance segments registered double digit percentage decline. Life Insurance sector closed down 12.61%, while its non-life counterpart shed 12.26%. Manufacturing & Processing sector closed lower by roughly 10% followed by Hotels sub-index which lost 8.38%. Heavyweight Banks also came under considerable pressure as the group's sub-index sank 7.53%. All other segments saw notable losses. 

Nepal Life Insurance Company Ltd was the most traded scrip in the week with a total transaction worth Rs 608 million. NIC Asia Bank Ltd closely followed with a turnover of Rs 523 million. Himalayan Distillery Ltd and NMB Bank Ltd, subsequently, saw turnovers of Rs 485 million and Rs 426 million. Nepal Bank Ltd, Shivam Cements Ltd and Nabil Bank Ltd were among other actively traded shares. 

This week, Nepse listed almost 7 million unit shares including bonus shares of Agriculture Development Bank Ltd, RMDC Laghubitta Bittiya Sanstha Ltd, ICFC Finance Ltd and Ganapati Microfinance Bittiya Sanstha Ltd. 

In the technical front, the sentiment remains firmly bearish with the formation of three straight red candlesticks on the weekly timeframe. Both weekly Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) which gauges the current trend and momentum of the market indicate that bears are dominant in the current juncture. Given the support of 1,200-1,220 points zone remains intact, some range bound or upward movement can be expected. However, the index is yet to see a major rebound that can act as an impetus for a notable reversal from the current sharp downtrend.

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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