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By Bikram Chitrakar
Nepal Rastra Bank’s actions against some financial institutions and the forthcoming public issue of Chilime Hydropower Company Ltd. swayed the secondary market of Nepal during the month from April 13 till May 20, 2011. During the period the Nepal Stock Exchange (NEPSE) index registered double-digit loss closing at 343.57 while the highest for the review period was on 25 April (356.87) and lowest was on 4 May (338.86).
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Hydropower sector experienced the highest decline ahead of the initial public offering of Chilime Hydropower Company. The sector’s loss was led by heavy fall in Butwal Power Co. followed by a less severe fall in Arun Valley Hydropower Company.
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Also the banking and finance sectors lost significantly as Nepal Rastra Bank leaked information continuously to the press indicating that the country’s banking sector was in trouble. The people believed in those newspaper reports because two financial institutions – Gurkha Development Bank and Nepal Share Markets and Finance Company – were really declared problematic. The result is the loss in people’s (and investors’) confidence on the country’s banking sector.
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However, there were some positive news reports as well. Nepal Rastra Bank has brought out the regulations for the merger of banking and financial institutions. Newspapers have reported that some such institutions are already in talks for merger. Meanwhile, Securities Board (SEBON) has issued letters of intent to five new stock brokers.
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Another positive development was the decision of the high level committee headed by deputy prime minister and finance minister Bharat Mohan Adhikari to ask the public sector institutions with high investible fund to invest in the secondary market. If this request is actually implemented, the demand for shares is expected to increase which will send the NEPSE up.
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Yet another positive development of the month was the healthy financial situation noticed in the third quarter reports of most of the financial institutions.
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Performance by Sector
Commercial banking sector, which is dominating the volume of trade in NEPSE, added 3.50 points to close at 303.59 while trading sector went uphill 4.88 points or 1.83% to settle at 265.96. However hydropower sector suffered the heavy loss of 121.29 points or 20.04% to rest at 605.35. ‘Others’ sector containing the heavy scrip of Nepal Telecom receded 66.95 points to 473.52. Insurance sector fell 21.91 points along with 19.78 points decline in hotel sector. They rested at 421.03 and 415.05 respectively. Similarly, finance sector shed 7.75 points or 2.56% to close at 302.23.
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Sensitive index that measure the performance of 117 blue chips scrip at secondary market dropped 3.62 points or 4.28% to 84.66 while the float index calculated on the basis of real transaction sunk 0.62 points to 29.04. Total of Rs. 608,584,981 was realized during review period from 1,911,339 units of share trade via 26432 transactions.
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The accompanying figure depicts the sector-wise distribution based on total amount of trade. Manufacturing and Processing sector covered 50.90% breaking the previous domination of Commercial Bank which now accounts for 20.36% of total trade. Similarly, finance sector accounted for 10.35%, development bank occupied 9.06% while remaining sectors made up for the rest.
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Technically, Simple Moving Average (SMA) is weaker as it has dominated the market. Both 200 days SMA and 30 days SMA along with Nepse index were moving in straight line indicating the sideways movement for coming sessions.
(Chitrakar is a Stock Analyst with Jamb Technologies Pvt Ltd.)
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