Weekly Commentary: Thursday’s advance helps Nepse notch weekly gain

Published On: October 3, 2020 03:01 PM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Oct 3: The stock market witnessed range bound trading in the week earlier. The theme of uncertainty carried over to this week’s trading with the Nepal Stock Exchange (Nepse) index registering a modest 4-point gain on Sunday. The benchmark erased Sunday’s advance on the following trading day as Monday saw a loss of 4.72 points. The market saw marginal declines on Tuesday and Wednesday where the index shed 7.21 points and 3.19 points, respectively. Nonetheless, the equity market saw considerable strength on Thursday with a rally of more than 20 points. Nepse ended week at 1,571.04 points – up 9.77 points or 0.63% against the day earlier.

While the index consolidated in the week earlier on the back of profit booking in some of the sectors including insurance, ‘others’ and manufacturing/ processing sub-groups, advances in hydropower and banking and financial sectors helped the index maintain its ground firmly above 1,550 points. Hence, the equity market continues to see optimism, albeit relatively subdued. Turnover dropped slightly to Rs 11.42 billion compared to Rs 12.15 billion in the week earlier.

Sensitive Index also inched higher following the broader market. Meanwhile, in terms of sectoral performance composite sub-indices ended the week mixed. Investors showed notable enthusiasm on taking long positions of BFIs’ stocks. Development Bank and Finance sectors rallied 6.25% and 3.85%, respectively. Non-Life Insurance and Banking sectors followed suit with gains of 1.43% and 1.09%. Hotels segment also closed 0.88% higher. On the other hand, Trading sector came under pressure as the group’s sub-index tumbled 2.95%. ‘Others’ and Life Insurance sectors fell around 0.6% each. All other sectors fell marginally.

Shares of Soaltee Hotel Ltd were traded the most in the review period. Over Rs 503 million worth of the hotel’s stock changed hands. Next, Himal Dolakha Hydropower Company Ltd posted a turnover of Rs 472 million. Nepal Reinsurance Company Ltd, Arun Kabeli Power Ltd and Arun Valley Hydropower Development Co. Ltd followed suit with turnovers of around Rs 400 million each. Kumari Bank Ltd, Api Power Company Ltd and Nepal Bank Ltd followed suit.

This week, Bank of Kathmandu Ltd announced its dividend for the year 2019/20. While doubts prevailed regarding dividend distribution capacity of BFIs with the pandemic affecting services and economy as a whole in the last quarter of the previous fiscal year, distribution of dividends by few banks reflect that the impact has remained relatively restrained. As a result, BFIs stocks have experienced notable interest in the last couple of weeks. Investors have mainly opted for relatively cheaper commercial banks, development banks and finance companies of late. 

As per ARKS weekly technical analysis, the market formed a bullish dragonfly doji candlestick on the weekly timeframe. This reflects that the market was able to absorb aggressive selling mid-week helping the index close the week above the opening level. Hence, momentum is favoring the buyers in the present context. Both weekly Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) are also tilted upwards indicating that the short term uptrend has remained intact. A breach of 1,600 points level to the upside with notable volume can see the index make its way towards its February high.

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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