KATHMANDU,July 3: Since the onset of the pandemic-driven slump from the first week of March, Nepal’s equity market has lost over 25 percent of its capitalization. The rout persisted for weeks ahead and amidst the lockdown, bringing the index close to its multi-year low. However, with the government relaxing restrictions on movements, the Nepal Stock Exchange restarted trading on June 29.
While many speculated a free fall of stocks, investors found respite as the benchmark index traded the week mostly in the positive zone, albeit with notable volatility.
On Monday, after shedding over 4 percent, or almost 50 points in the morning, the Nepse index staged a recovery trimming its losses to end with a minimal decline of 12.87 points. The stock market registered massive gains on Tuesday and Wednesday, hitting the positive circuit limit of 6 percent in both sessions.
However, stocks came under pressure on the last trading day of the week as the index pulled back sharply to end 6 percent lower.
Overall, the index ended the week 54.53 points or 4.54 percent higher at 1,256.11. The total turnover remained moderate with only Rs 1.6 billion worth of shares traded in the review period.
The sentiment seems to be gyrating in the recent sessions as investors are finding it hard to gauge the COVID-19 pandemic effect on the economy and consequently on the share market. Despite the economy progressing toward normalcy, businesses are yet to return to their pre-pandemic level which might take a significant amount of time for some industries including entertainment, travel and tourism, among others.
The banking and financial industry is no exception. With heavy weightage on the market-cap based index in Nepse, the industry’s performance has a significant control in the equity market as a whole. Nonetheless, with stocks trading at multi-year lows already, the outlook for the secondary market remains largely uncertain.
Most of the traded sectors ended the week higher. Trading and life insurance stocks were the biggest winners as the corresponding sub-indices shot up by 18 percent and 12 percent. Manufacturing & Processing, Non-Life Insurance and ‘Others’ segments also closed the week fairly higher. All other sectors saw gains barring Hotels, Development Bank and Mutual Fund sub-indices.
As per the ARKS technical analysis, the market formed a bullish candlestick with long wicks indicating significant volatility as the market fluctuated by 200 points reaching 1,150 points on the lower side while hitting 1,350 points mark on the upside. As the market begins to consolidate, the aforementioned level can be taken as a short-term support and resistance. Hence, a breach toward either side can suggest a likely course for the market. Weekly technical indicators indicate neutral to bearish sentiments prevailing in the current juncture.
Extremely cautious trading is advised.
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)