Daily market commentary

Nepse up roughly 200 points in its best week till date

Published On: February 29, 2020 11:04 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU: The local stock exchange began the week on a highly upbeat note as the Nepal Stock Exchange (Nepse) index witnessed a massive 70-point rally. Monday saw some indecision with the index shedding 2 points, while bulls took over in all of the trading session. The equity market showed no sign of losing steam as the major average jumped 43 points on Tuesday and extended its gains further on Wednesday and Thursday with rallies of 51 points and 36 points, respectively. Nepse accumulated a total of 197.6 points or 13.77% to close the week at 1,632.17 points. 

The biggest weekly gain came as investors switched focus to commercial banks after microfinance, insurance and other sectors were trading around their all-time or multi-year highest levels, following the rally starting early December. Hence, banking segment, which was yet to see any major movement, saw heavy buying with investors expecting the Bull Run to gather more legs. With heavyweight banks starting their rally, some speculate that the market will breach its all-time high of 1,881 points hit on late July 2016. Meanwhile, some investors also expect a correction to follow after a three-month-long rally. Nonetheless, Nepse has been posting a series of record volumes which indicate fresh investors or novel funds are entering the market, making the current movement purely demand-driven. In such a case, major pullback is highly unlikely. Weekly turnover made a fresh record surging by over 66% week-on-week to over Rs 18 billion.

Class 'A' stocks outperformed the broader market. As a result, Sensitive index shot up by 15.72%. In terms of sector-wise performance, sub-index of heavyweight banks soared almost 20%. Life Insurance sub-index also saw considerable upbeat movement and closed roughly 15% higher. Meanwhile, Manufacturing & Processing and 'Others' sectors' sub-indices were up by over 11%. All other sectors followed suit with firm advances. 

Nepal Life Insurance Company Ltd was the most actively traded stock in the week on review. Over Rs 877 million worth of the life insurer's shares changed hands. Further, NMB Bank Ltd and Himalayan Distillery Ltd registered turnovers of around Rs 650 million each. All of these stocks have experienced massive rally in the recent bullish movement. Shivam Cements Ltd, NIC Asia Bank Ltd and Nepal Bank Ltd were among other top turnover stocks of the week. Mainly banking stocks were in focus for trading as the overall segment saw substantial transactions in the review period. 

Technical analysis by ARKS suggests remarkably bullish sentiment prevailing in the bourse. Formation of a strong bullish candlestick with multiple resistance breakouts suggests that the index is rallying with notable momentum. Weekly Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) also reflect strong uptrend in action. However, investors must lookout for a correction as RSI has reached overbought zone which indicates a correction on cards. Further resistance of the index lies at 1,660 points and 1,700 points. On the downside, 1,600 points will act as a major support. 

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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