--By Bikram Chitrakar

 

The secondary market surpassed all previous levels and posted a four-year high with 587.92, as investors focused on upcoming Constitutional Assembly (CA) election and dividend declarations. The benchmark Nepse index added 37.66 points or 6.50% to rest at 579.61. While the review period high was on 21 October with 587.92 and low was on 26 September with 541.70. 

 

Rise in the price of commercial banks, insurance companies and ‘others’ sector contributed to achieve the level of four-year high breaching the record of 28 October, 2009 which was 585.04. Positive political climate fostered by the forthcoming CA election played a large role in boosting the sentiment. 

 

During the previous CA election, held on 10 April, 2008, the index had hovered around 746.69 and had climbed to a historical high of 1175.38 within four months after the election. Similar trend has been expected this time also with possibility of market expansion in post election period. If this expectation proves true, the market is likely to see 600 points mark soon. 

 

Adequate liquidity and reduction in the interest rate offered by different banking institutions on saving deposits are the other reasons to drag attention of investors towards the secondary market. Moreover, the investors are finding it easier to get loan against share certificates. That too has boosted the market activity. 

 

Favourable first quarter reports and dividend announcement have too cleared the way for the market to move along the growth path. Though natural corrections cannot be ruled out, in those cases too there will be newer and even higher growth targets. 

 

Performance by Sector

During the review period, the hotels sector added 195.15 points or 21.89% to rest at 891.55. Hydropower sector moved 116.85 points up to close at 1386.2. Similarly, insurance sector escalated 63.43 points or 4.62% to close at 1373.34 while ‘others’ sector surged 58.74 points to 716.67. Commercial banking sector accelerated 34.25 points or 6.19% to settle at 553.75. 

 

Sensitive index that measures the performance of 120 blue chips at the secondary market went up by 8.52 points or 6.12% to 139.12. The float index calculated on the basis of real transactions moved higher by 1.88 points or 4.65% to 40.47. Total of Rs. 2,323,198,070 turnover was realized during the review period from 7,858,589 units of shares traded via 29771 transactions.

 

The accompanying figure illustrates the sector-wise distribution based on the total volume of trade. As usual, commercial bank sector dominated the volume, grabbing 62.12% of trade. Insurance sector occupied 13.03% while development bank accounted for 11.08% and remaining sectors constituted the rest.  

 

Technically, the Simple Moving Average (SMA) has dominated the market in both long term and short term. However, correction at this level is persistent for new resistance level.

(Chitrakar is a Stock Analyst with Jamb Technologies Pvt Ltd.)