Daily Market Commentary

Stocks stretch correction as volume dips firmly

Published On: June 1, 2021 10:21 PM NPT By: Republica  | @RepublicaNepal

KATHMANDU, June 1: The equity market traded over 17 points higher in Tuesday morning, recouping some of the prior day losses. Nonetheless, extended profit booking in the session dragged the market lower as Nepse hovered close to the opening level for most of the afternoon. A dip in the final trading minutes saw the benchmark end with a 11.68 point’s decline at 2,771.15. 

Correction in most of the sectors continued with Nepse tanking over 30 points late in the afternoon before a modest recovery helped the index cut its losses. Hence, the index has lost some steam of late following index’s upbeat movement in the month of May. Turnover, nonetheless, fell sharply to below Rs. 9 billion suggesting relatively subdued momentum in the recent drop.

Most of the segments witnessed losses on the day, while only few landed in green. Hotels and Tourism sector came under substantial pressure as the group’s sub-index plunged 2.49%. Sub-index of trading sector fell 1.53%, while that of Hydropower stocks dipped 1.01%. Non-Life Insurance, Investment and Life Insurance sub-indices also ended almost 1% lower. Manufacturing & Processing, Banking and Microfinance stocks ended marginally lower on average. Meanwhile, ‘Others’ sub-index added 0.7%. Development Bank, Finance and Mutual Fund sectors eked out modest gains.

Shares of Nepal Reinsurance Company Ltd were traded the most with a turnover of over Rs. 570 million. Lumbini Bikas Bank Ltd and Radhi Bidyut Company Ltd, subsequently, registered turnovers of Rs. 304 million and Rs. 234 million. United Modi Hydropower Ltd and Asian Life Insurance Company Ltd saw transactions of over Rs. 160 million. Jyoti Bikas Bank Ltd, Arun Kabeli Power Ltd and Hydroelectricity Investment and Development Company Ltd were among other actives of the session. 

Kalika Power Company Ltd bucked the trend to hit the upper circuit limit of positive 10%. Lumbini Bikas Bank Ltd closely followed with an 8.25% surge. Gurkhas Finance Ltd and Summit Laghubitta Bittiya Sanstha Ltd shot up by over 7%. Mahalaxmi Bikas Bank Ltd, Nepal Reinsurance Company Ltd and Narayani Development Bank Ltd registered gains of 5.43%, 4.62% and 3.84%.

Energy stocks were among the day’s biggest decliners. Dibyashwori Hydropower Ltd suffered a loss of 5.02%. Khani Khola Hydropower Co. Ltd, Joshi Hydropower Development Company Ltd and Ankhu Khola Jalvidhyut Company Ltd’s shares also came under pressure and closed over 4% lower each. Mountain Hydro Nepal Ltd, Ghalemdi Hydro Ltd and Union Hydropower Ltd logged in declines of over 3% each. 

On the technical front, a follow up red candle after a large bearish candlestick suggests possibility of some correction in the coming sessions. An immediate support of the equity market lies at 2,735 mark, where a volume backed rebound can be taken as an opportunity to go long. Momentum indicators also indicate shift in momentum as bears are gaining control in the current juncture. Hence, investors are better off taking a cautious stance, unless the market makes a notable recovery with above average turnover. 

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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