Weekly Market Commentary

Stocks log weekly loss but consolidation continues

Published On: November 9, 2019 09:09 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU: The local equity market remained largely under pressure in the week. On Sunday, the Nepal Stock Exchange (Nepse) index dipped 6.88 points. The selling pressure eased off slightly on Monday with the bourse adding a meager 0.97 points. Tuesday and Wednesday also saw modest moves with losses of 0.81 points and 1.43 points, respectively. The equity index stretched its loss for a third straight day with a 6.05 points decline on Thursday. Eventually, Nepse ended the week at 1,131.97 points – down 14.2 points or 1.24 % against the week earlier. 

Despite the loss, the bourse closed in its consolidation zone between 1,120 to 1,150 points for the seventh week in a row and is likely to follow suit. The upbeat dividend announcements by Banking and Financial Institutions (BFIs) in the past couple of months were annulled by murky financial outlook with credit crisis still looming in the financial market.

Meanwhile, commercial banks and microfinances have begun publishing earning results which can be a crucial driving factor in the equity market. In terms of market participation, trading volumes is yet to pick up pace as the exchange witnessed a sub-par weekly turnover of Rs 1,232 million.

Sensitive Index, gauging Class 'A' stocks' performance, also slumped 1.50 %. In terms of sectoral movement, most of the groups closed lower in tandem with the broader index. 'Others' segment suffered the most tumbling 3.27 %. Finance and Hotels sectors also struggled as the respective sub-indices dropped over 2 % each. Banking, Manufacturing & Processing and Life Insurance segments all closed over 1 % lower. Non-Life Insurance and Development Bank stocks also ended in red. On the other hand, Trading sub-group significantly outperformed, rallying 12.46 % in the week, driven mainly by consecutive surges seen in Salt Trading Corporation's stock. Mutual Fund sub-index also jumped 3.30 %. Microfinance and Hydropower sectors eked out marginal gains in the review period.

Shares of Prabhu Bank Ltd, among actives, registered the highest turnover of over Rs 147 million. The bank will be closing its shareholders' book on Monday for the purpose of convening its Annual General Meeting (AGM). The bank will be endorsing the decision to distribute 16 % stock dividend to its shareholders in the meeting. Shares of NMB Bank Ltd also witnessed heavy market participation after the bank's scrip opened trading post merger with Om Development Bank Ltd after over 5 months.

Nabil Bank Ltd, subsequently, registered a turnover of Rs 66 million. The bank declared 12 % bonus shares and 22 % cash dividend for the year 2018/19 earlier this week. Prabhu Bank Ltd Promoter Shares and Nepal Bank Ltd, meanwhile, logged in turnovers of Rs 57 million and Rs 51 million.

The index, as per the ARKS technical analysis, formed a bearish weekly candlestick stretching its previous week's loss. However, the index remains bound within its current consolidation range between 1,120 – 1,150 points amid lack of clarity in terms of its future movement. Weekly technical indicators, meanwhile, suggest the market lacking strength with no sign of immediate reversal on the cards. The line of 1,150 points has acted as a major resistance in the past month which might be retested in the coming weeks, where a breakout above the level can make way for further upward movement. Another resistance lies at 1,180 points, while support is provided by 1,120 points line.

This column is produced by ARKS Capital Advisors Ltd
(Views expressed in the article are those of the producer and do not necessarily reflect those of this publication)

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