Weekly Market Commentary

Nepse ends week lower as Sebon’s press release mars investor sentiment

Published On: June 25, 2021 07:30 PM NPT By: Republica  | @RepublicaNepal

KATHMANDU, June 25: Stocks stretched their losing run opening the week with a sharp dip. On Sunday, the Nepal Stock Exchange (Nepse) index fell 63.10 points followed by a 70.91 points’ rout on Monday. With the index dipping more than 190 points in five consecutive sessions, the bourse saw notable buying pressure at mid-week. The benchmark recouped 79.43 points on Tuesday. However, the rebound was cut short by further selling pressure towards the end of the week. The Nepse index plunged 53.88 points on Wednesday, while Thursday saw a relatively modest dip of 16.96 points. Overall, the index registered a decline of 125.42 points in the review period, its biggest weekly loss in more than a year. The 4.23%-dip saw the index end at 2,843.

While many composite indices were making new highs, a cautionary press release from Sebon made a massive dent on investor sentiment. Sebon pointed out 51 stocks, which they deemed as overvalued and urged investors to invest in the secondary market with caution. The event dragged the overall market down as aggressive profit booking and panic selling continued to pull the market lower since the latter part of previous week. Turnover also tanked sharply. After registering turnovers of over Rs. 80 billion in two consecutive weeks, the bourse’s total transaction in the week-on-review remained capped below Rs. 50 billlion mark.

All sectors succumbed to the broad selling pressure. The biggest losses came from the prior month’s leading sectors. Development bank and Finance sub-indices tumbled more than 7%. Microfinance, ‘Others’ and Life Insurance segments also struggled with the respective gauges dipping more than 5%. Manufacturing & Processing, Non-Life Insurance and Hotels & Tourism segments, meanwhile, closed more than 4% lower. All other sectors ended the week firmly lower. Heavyweight banks lost 3.34%.

Radhi Bidyut Company Ltd was the week’s biggest gainer with a 14% advance. The hydropower development company has called for its Annual General Meeting (AGM) to be held on July 13. Approval of 36.5% stock dividend and 147.52% right shares are the main agendas of the meeting, among others. Hydroelectricity Investment & Development Company Ltd, National Hydropower Company Ltd and Narayani Development Bank Ltd also bucked the trend to close the week in positive territory. 

On the other hand, newly listed CEDB Hydropower Development Company Ltd suffered the most correcting around 14%. Union Hydropower Ltd, Nepal Reinsurance Company Ltd and Shree Investment & Finance Co. Ltd were the other major losers. 

As per the ARKS technical analysis, the index formed a sharp bearish candlestick erasing two weeks’ gains. Hence, sellers were in firm control of the market. Besides, investors refraining from taking sizable long positions intensified this week’s slump. On a slightly positive note, the bearish pressure tapered off towards the end of the week as turnovers fell on each consecutive session. Weekly Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) suggests loss of momentum of late. Nonetheless, 2,830-2,840 zone acts as a strong support for the market where a volume-backed rebound will suggest further move to the upside. On the other hand, a breach of the aforementioned support level, can see the index stretch retracement towards next support at 2,750.

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)

Leave A Comment