Weekly market commentary

Stocks stretch gains for a third consecutive week

Published On: February 15, 2020 10:46 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU: The Nepal Stock Exchange (Nepse) index opened the week on a slightly bearish footing as it gave up over 13 points on Sunday. 

However, stocks saw considerable strength in the following three sessions. 

Monday witnessed a gain of 4.27 points, while Tuesday and Wednesday saw the benchmark index add 17.12 points and 4.59 points, respectively. 

The index took a breather on Thursday with a modest 1.38 points correction. Overall, the index collected 10.9 points or 0.82% in the week ending at 1,344.59 points.

The series of gaining sessions have pushed the Nepse index up to its 21-month weekly closing high. Sustained upbeat trading has been the theme for the entire two months as investors seemed to be pouring in any of the gains realized back into the equity market. This has allowed the index to make fresh highs with only minor corrections in between. 

After registering record monthly turnover in January, the bourse has continued to witness heavy trading. In the review period, the exchange logged in a turnover of Rs 6.70 billion while it had posted a turnover of Rs 7.39 billion in the week earlier.

The overall market saw considerable strength but Class 'A' stocks slightly underperformed this week. 

Sensitive Index added marginal 0.07%. In terms of sector wise performance, 7 of the total 12 traded segments ended the week in green. Microfinance sub-index shot up by 7.52% as the majority of its component stocks surged in the week. 

Similarly, gains from Shivam Cements Ltd pushed the Manufacturing & Processing sub-index 5.07% higher. Sub-index of Trading stocks jumped 3.67%, while those of Non-Life Insurance and 'Others' sectors added over 2%. 

Life Insurance segment also climbed 1.83%. Mutual Fund and Finance sub-indices edged slightly higher. On the other hand, Hotels segment tanked by 3.50% and Hydropower sector lost 1.38%. Banking and Development Bank sub-indices inched marginally lower as well.

In major news, the first stock dealer of the country was registered by the name of Nagarik Stock Dealer under the major ownership of Citizen Investment Trust (51%). 

10% and 9%of the total capital is owned by Nepal Telecom Ltd and Nepal Reinsurance Company Ltd, while the remaining 30% will be floated to the general public. By trading on its own account, stock dealer continuously maintain price levels by setting up a specific bid and ask prices acting as a market maker. 

Hence, limiting volatility, maintaining liquidity and promoting long-term stability in the equity market are among the major objectives of the establishment. 

The establishment of the dealer is welcomed by investors as a step, albeit one of a few, in the right direction towards sustained growth of the Nepali equity market.

In the corporate news, Ngadi Group Power Ltd made its dividend announcement for Fiscal Year 2018/19 on Friday. The energy sector company will be distributing 10% cash dividend for a second year in a row.

In terms of ARKS weekly technical analysis, the index formed a spinning top bullish candlestick reflecting slight indecision in the market. 

Nonetheless, the index managed to stretch its gaining streak for three consecutive weeks. While weekly Moving Average Convergence Divergence (MACD) indicates that the uptrend is still in action, Relative Strength Index (RSI) has reached overbought zone suggesting investors to take caution while taking heavy long position. 

In the intra week timeframe, the 1,150 points mark has still acted as a major resistance. 

Hence, for a further uptrend to follow, a momentous breach of the respective level is crucial.

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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