Market Gone Flat after Breaching Record (Review for 25 August to 24 September, 2015)

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--By Bikram Chitrakar

The secondary market touched the historic high during the review period ahead of the promulgation of the long awaited new constitution. But after the constitution was promulgated, it shed some of the gains and remains flat then after. 

The benchmark Nepse index lost 4.55 points, or 0.39%, during the review period to close at 1176.86 after touching the history’s high of 1205.84 on 15 September when it was confirmed that the New Constitution was certain to be promulgated the next day.  The session’s lowest was 1156.08 on 22 September.     

The fact that the New Constitution was being promulgated with over 90% of the Constituent Assembly members supporting the new Statute, boosted investor confidence. But that was short-lived. 

Previously, the market was bullish after the release of monetary policy that asked the banking and financial institutions to substantially raise their paid up capital. Demand for the commercial bank stocks was boosted by this monetary policy while the simultaneous drive to dematerialize the shares caused the supply to be limited.  

However, after the historic high of 1205.84 was reached, many investors started booking profit causing some corrections. But the correction phase lengthened due to new wave of political environment again turning murky due to continued protests, often violent, mainly in the Terai, against the new constitution. News of unannounced trade embargo by India sent fears across the investors triggering the selling pressure. 

In another development, Nepal Stock Exchange (NEPSE) has urged public companies, state owned enterprises and delisted companies to use the Over the Counter (OTC) system under NEPSE so that their stocks can be traded through the NEPSE. Share trading through OTC is rare in Nepal and experts say this is because this system is not promoted adequately. Some four years ago, shares of Nepal Bank Ltd. were traded in OTC while transferring some of the government ownership to company employees. 

During the review period, total share turnover increased by 26% to Rs 10.66 billion from 50,637 transactions. Shares of finance and development companies registered were the highest gainers with Arun Finance (69.23 up), Kankai Bikas Bank (42.38%), Mirmire Microfinance (32.58% up), Hama Merchant (28% up) and Nepal Express (27.16 % up) among the top gainers in the group.

Performance by Sector
The ‘Other’ sector which has a heavy share in the total number of scrips listed in NEPSE, lost 6.99% during the review period. Similarly, hotel sector cut off 3.91% followed by 2.87% down in hydropower sector. Commercial bank descended 1.13% to close at 1115.35. However, manufacturing sector added 6.60%, followed by 4.85% and 3.08% up in development bank and insurance sector. Finance sector increased by 1.72% while trading sector was positive by 0.23%.
The pie chart depicts the sector wise distribution on the basis of total volume of trade. As usual, major portion of the trade was occupied by banking sector covering 68.81%. Insurance sector covered 12.77% while development bank sector shared 8.30%. Around 5.13% of the portion was booked by hydropower sector and remaining by other sectors. Techincally, Simple Moving Average (SMA) shows a situation of holding back. The market is seen testing previous resistance level near 1175. Pivotal analysis shows the support level of 1153.34-1129.83-1103.58 and resistance level of 1203.1-1229.35-1255.6 for the coming period and highest hovering range between the levels of 1191.35 to 1216.23.

Chitrakar is a freelance Stock Analyst.

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