Daily market commentary

Nepse slumps 96 points amid heavy correction

Published On: March 3, 2020 10:24 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, March 3: Weakness carried over to Monday's session as the equity market witnessed a sharp slide in the morning. The Nepal Stock Exchange (Nepse) index fell almost 40 points in the beginning half an hour but staged a recovery. Nonetheless, the rebound was short lived as sellers dominated the latter trading session. The index hit its 2 hour lower circuit limit of 5% at 12:46 am before trading was halted for 40 minutes. On the resumption, Nepse sank further 1% to hit the day's negative circuit limit of 6% with more than 1 and a half hour of sessiormal trading hour remaining. With the session cut short, Nepse registered a loss of 96.06 points to settle at 1,495.30 points. 

Following Monday's truncated session, volumes were limited to just over Rs 2 billion. The massive fall came after Nepse's parabolic surge of almost 200 points in the previous week. Consequently, a healthy correction was overdue, but fearing a slump, investors resorted to panic selling or profit booking in the bourse. Amidst the volatility, the uptrend still remains intact with the index still trading more than 300 points higher for the year till date. 

All sectors succumbed to Monday's selling pressure with insurance sectors taking the major hit. Both Life Insurance and Non-Life Insurance sub-indices dropped by more than 7%. Heavyweight banking sub-group, which posted some of its biggest rallies in the previous week, also gave in to substantial profit booking as Banking segment pulled back by 6.74%. Microfinance stocks were the other major laggards which closed down by 5.1%. Further, Development Bank, Manufacturing & Processing and Hotels sub-indices lost over 4% each.

Shares of Nepal Life Insurance Company Ltd were traded the most. Over Rs 156 million worth of the life insurer's shares changed hands. Shares of NIC Asia Bank Ltd were also heavily traded with transactions of Rs 146 million. NMB Bank Ltd, Global IME Bank Ltd and Prabhu Bank Ltd followed suit with turnovers of Rs 89 million, Rs 75 million and Rs 73 million, respectively. Himalayan Distillery Ltd, Nabil Bank Ltd and Nepal Bank Ltd were among other actively traded stocks.

As the market remained affected by heavy selling pressure, only three stocks ended the day higher. NIC Asia Balance Fund, Khanikhola Hydropower Co. Ltd and Shree Investment Finance Co. Ltd saw modest gains on the day. 

Over 15 stocks tumbled over 9% on the day. Suffering the biggest losses non-life insurers – Prabhu Insurance Company Ltd, and Premier Insurance Company Ltd tumbled almost 10%. Garima Bikas Bank Ltd, RSDC Laghubitta Bittiya Sanstha Ltd, Grameen Bikas Laghubitta Bittiya Sanstha Ltd and Shikhar Insurance Co. Ltd's shares also came under considerable pressure giving up roughly over 9.8% apiece. Surya Life Insurance Company Ltd, Standard Chartered Bank Ltd and National Microfinance Bittiya Sanstha Ltd were among other major decliners. 

On the technical front, the index formed a strong bearish marubozu candlestick suggesting heavy selling pressure in Monday's trading. The index broke its support at 1,550 points and now trends at another support zone between 1,480 and 1,500 points. Technical indicators also suggest that the index will likely correct further. Hence, breach of the current support might see the index correct further towards another psychological level at 1,450 points. On the other hand, a rebound might see the equity market maintain its positive bias keeping the uptrend intact.

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