Daily market commentary

Nepse falls as monetary policy fails to lift investors' sentiment

Published On: July 26, 2019 03:00 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, 26: The securities market witnessed constant selling pressure throughout Thursday's trading session as the benchmark Nepal Stock Exchange (Nepse) gave up more than 9 points in the initial trading hour. Though the index recouped some of its losses early in the afternoon, stocks continued to struggle throughout the latter trading hours. At the close, Nepse posted a loss of 14.15 points to settle at 1,269.92 points.

Nepal Rastra Bank (NRB) remained silent on forced merger of commercial banks in the Monetary Policy for Fiscal Year 2019/20 released on Wednesday. However, the monetary policy has encouraged mergers and acquisitions of banks and financial institutions through a number of incentives. The central bank has made mandatory for all commercial banks to issue debentures worth 25% of their capital within this fiscal year, while such limit for banks going for merger will be extended for another fiscal year. Some measures to lower interest rates have also been taken. The spread rate for banks has been set as 4.4% - down from earlier 4.5%. Besides, various other provisions have been made to address liquidity situation in the economy. Despite the policy remaining largely on the positive side, some market skeptics believe that the provisions are still not enough to address the current interest rate issue or credit crisis problems. Secondary market participants seem to share the similar opinion as reflected by a broad sell-off seen on the day. Total turnover stood at Rs 550 million which is 24% higher than market activity of the previous day.

The broad slump saw all sectors close the day in red. Hydropower, Non-Life Insurance and Hotels sectors suffered the most as their respective sub-indices tanked 1.78%, 1.63% and 1.56%, respectively. Further, sub-indices of Microfinance, Development Bank and Banking sectors logged losses of over 1% each. All other segments followed suit with moderate losses.

Shares of Prabhu Bank Ltd were actively traded on the day with a turnover of over Rs 61 million after the company reported more than 100% increment in its net profit. As per its financials for the fourth quarter of FY2018/19, the commercial bank's earnings stand at over Rs 2,050 million. Agriculture Development Bank Ltd and Nepal Bank Ltd registered turnovers of Rs 41 million and Rs 39 million, respectively. Upper Tamakoshi Hydropower Ltd, Mega Bank Ltd and NIC Asia Bank Ltd were other active scrips of the day.

Nepal Lube Oil bucked the trend as its share price rallied by almost 9%. Similarly, shares of Shree Ram Sugar Mills Ltd posted gains of 4.61%. Global IME Laghubitta Bittiya Sanstha Ltd and Khanikhola Hydropower Co Ltd also saw their share prices climb up by over 3% each. Nepal Hydro Developers Ltd, Sparsha Laghubitta Bittiya Sanstha Ltd and Ridi Hydropower Company Ltd, meanwhile, added over 1% on their share price.

In contrast, Union Hydropower Ltd came under significant pressure as the hydropower developer's share price hit the lower circuit of 10%. Share price of National Microfinance Bittiya Sanstha Ltd declined by 5%, while Barun Hydropower Co Ltd and Nadep Laghubitta Bittiya Sanstha Ltd saw their share prices fall by over 4% each. Oriental Hotels Ltd, Ganapati Microfinance Bittiya Sanstha Ltd and Mahila Sahayatra Microfinance Bittiya Sanstha Ltd were the other major losers of the day.

Among companies publishing their financials for the fourth quarter of FY2018/19, Global IME Laghubitta Bittiya Sanstha Ltd saw its net profit grow by over 300%. Its earnings stands at Rs 68 million compared to Rs 15 million in the previous year. Similarly, NMB Microfinance Bittiya Sanstha Ltd reported an 86% year-on-year growth in its net profit to Rs 60 million.

As per ARKS technical analysis, the market formed a bearish marubozu candlestick on the day, reflecting sustained selling pressure seen in the bourse. The momentum which was apparent in the previous sessions has subsided fairly. Nonetheless, the index is still trending around support level of 1,270 points. Hence, only a breach of the support zone with considerable volume in the coming days will substantiate the downfall further.

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