Daily market commentary

Nepse posts modest weekly loss giving up earlier gains

Published On: July 27, 2019 07:18 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, July 27: Local bourse opened the week on a slightly bearish tone as the Nepal Stock Exchange (Nepse) index dropped 3.75 points on Sunday. Nonetheless, buyers remained comparatively active in the following trading sessions. 

The equity index climbed 2.49 points on Monday. Furthermore, Tuesday and Wednesday's trading saw Nepse register gains of 5.94 points and 6.9 points, respectively. 

However, following the monetary policy announcement on Wednesday evening, the equity index fell more than 14.15 points on Thursday. Overall, Nepse ended the week 2.57 points or 0.2% lower at 1,269.92 points.

Despite the outlook looking favorable initially amid build up for the monetary policy unveiling, investors took a significantly defensive stance after the announcement thereof. Apart from encouraging mergers and acquisitions (M&As) among bank and financial institutions (BFIs), the monetary policy for the Fiscal Year 2019/20 has included various measures to address the current credit crunch. 

Interest rate has been on the higher side since the last couple of years, aggressive lending coupled with comparatively lower deposit growth being the primary reason. However, many are of the view that the provisions are still not enough to eradicate the problem substantially. 

Investors resorted to actively selling equities on Thursday bringing the index lower compared to the previous week's close. Meanwhile, moderate activity was seen in the exchange as the weekly turnover remained below Rs 2 billion mark. 

Sensitive Index, gauging the performance of Class 'A' stocks, dropped 0.14%. Similarly, most of the sectors fell during the week. Microfinance stocks outperformed the broader market substantially with a 2.10% gain in the group's sub-index. 'Others', Hotels and Banking sub-indices also closed marginally higher. Mutual Fund units were the major drag of the week with a drop of 2.27% in the segment's sub-index. Hydropower sub-index, likewise, tumbled 2.14%. Manufacturing & Processing, Life Insurance and Trading sub-indices also registered losses of over 1% each. Besides, all other sub-indices closed in the red. 

Nepal Bank Ltd was the most actively traded stock followed by Agriculture Development Bank Ltd. The respective scrips posted turnovers of Rs 137 million and Rs 127 million. Prabhu Bank Ltd also saw heavy trading with more than Rs 121 million worth of its scrips being traded in the week. Nepal Life Insurance Co Ltd, Civil Bank Ltd and Nabil Bank Ltd were among other top turnover scrips. 

Among companies publishing fourth quarterly financials on Friday, Srijana Finance Ltd reported a 30% year-on-year growth to Rs 157 million. Similarly, Asha Laghubitta Bittiya Sanstha Ltd, Samata Laghubitta Bittiya Sanstha Ltd, Swadeshi Laghubitta Bittiya Sanstha Ltd, and Infinity Laghubitta Bittiya Sanstha Ltd also saw substantial increment in their respective net profits in the fourth quarter as compared to corresponding quarter previous year. 

As per the ARKS technical analysis, the market formed a small bearish candlestick on the weekly timeframe. Following the decline, the index has pulled back around 1,270 points which has historically acted as a crucial level. 

Weekly technical indicators, meanwhile, suggest a neutral sentiment. However, if the market extends the losses to close below 1,240 points in the coming weeks, further downward movement can be expected in the equity market. Towards the upside major resistance lie at 1,300 and 1,320 points. 

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