Weekly market commentary

Stocks cap wild week with modest loss

Published On: September 21, 2019 08:05 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU: The local stock market saw heavy losses in the beginning of the week. The Nepal Stock Exchange (Nepse) index fell 17.87 points on Sunday followed by a 16.18 point drop on Monday marking a fresh 5-month low. Following the sharp decline, the equity market made a notable rebound mid-week recouping all its early week losses. 

The benchmark index rallied 26.91 points and 22.68 points on Tuesday and Wednesday, respectively. However, the equity market gave up some ground in the final trading day of the week with Nepse losing 18.12 points on Thursday. Eventually, the index closed the week with a marginal loss of 2.58 points or 0.22% at 1,155.30 points.

The stock market which was on a constant declining run witnessed high volatility in the week amid tussle between buyers and sellers. While market participants fled the market in the beginning of the week fearing more southbound movement, sentiments were lifted in mid-week as investors began accumulating stocks in some of the lowest prices. Hence, Nepse has shown a preliminary signal of snapping persistent tumble, while some indecision is still visible as reflected by a late-week correction. 

In the meantime, commercial banks and microfinance companies continued to announce their dividends. Mainly commercial banks have held ground after respective dividend declarations helping heavyweight banks to perform slightly better than the broader market. Meanwhile, weekly turnover improved by over 20% to Rs 1,893 million.

Class 'A' stocks underperformed with the Sensitive Index edging 0.62% lower. In the meantime, sectors ended mixed. Trading and Manufacturing & Processing stocks saw significant strength with the corresponding sub-indices shooting up by over 3%. Hotels sub-index also posted a notable move to the upside and rose 2%. Microfinace sub-index added 1.33%. Hydropower, Finance and Development Bank sub-indices also closed higher. 

On the other hand, Mutual Fund group suffered the most as its sub-index shed 1.36%. It was followed by 'Others' sub-index which fell 1.08%. Banking, Life Insurance and Non-Life Insurance scrips also edged marginally lower.

In terms of market activity, shares of Shivam Cements Ltd witnessed highest weekly turnover. More than Rs 154 million worth of the shares changed hands. Subsequently, Siddhartha Bank Ltd posted a turnover of Rs 116 million after the bank announced 25.26% dividend including 10% bonus shares and 15.26% cash payout. Nepal Bank Ltd, Nepal Life Insurance Co Ltd and Prabhu Bank Ltd were also actively traded in the week.

ARKS technical analysis shows the index forming a small bearish candlestick on the weekly timeframe extending its losses to 9 consecutive weeks, its longest weekly losing streak in multiple years. Previously, the index fell for 8 straight weeks last year in May and June. Nonetheless, the spinning top candlestick formation indicates the sellers losing steam and bulls remaining equally active in the review period. 

Hence, the market currently is witnessing indecision. Given the market sees notable gains in the coming week with increased volumes, the index can be expected to make a rebound. Further, with weekly Relative Strength Index (RSI) approaching oversold territory sellers might be exhausted in the coming weeks making way for buyers to take over. 

Hence, investors are suggested to monitor the market closely in the coming week for a preliminary sign of reversal before going long in the equity market.

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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