--By Bikram Chitrakar

 

Capital market of Nepal witnessed a healthy growth in the year 2070 and ended with optimistic note for further enhancement. For the year, Nepse, the benchmark index of country's capital market, increased almost 300 points or 55 per cent to settle above the level of 800 points. 

 

Positive political developments, excess liquidity in the banking system, diminishing interest rates and resulting easy ‘margin type loans’ are attributed to the sky rocketing growth of the country's capital market. The composite effects of all these favourable phenomena have pushed the market index to its high of nearly six years. The index was on continuous slipping trend after reaching a historic high of 1175.38 in 2008. 

 

Furthermore, a dimension at shift in the investors’ portfolio holdings from banking and financial sector to hydropower and insurance sector was observed during the year 2070. Previously, investors were seen reluctant to purchase the shares of companies other than banks and financial institutions. Now the preference has been altered with the rise of the other sectors including hydropower, hotel and insurance. 

 

During the period of last one month from March 19 to April 16, 2014, Nepse index added 46.55 points or 5.74% to rest at 811.46. The initial sessions of the review period were in a red territory as selling pressure persisted ahead of the third quarter financial reports of listed companies. However, sentiments went positive after the facts pointed that the results are expected to be better. Besides, initiation of the Nepal Stock Exchange towards upgradation and dematerialization of share certificates also contributed to the optimism. 

 

Nepal Stock Exchange has also introduced trading automation bylaw and invited suggestions and inputs on a fully automated trading system. The exchange has also called for consultancy service from national and international firms for upgradation of its exiting trading platform. Previously, its call for Expression of Interest had included only eligible national consultants. However, now any consulting firm with at least five years of working experience in same kind of job, including at least three years of experience in online trading administration of three projects in stock exchanges, is eligible to compete. 

 

The market capitalization at the end of the period stood at Rs 827.06 billion, a growth of 6.19 per cent while the total turnover has recorded a strong growth of 31.65 per cent.

 

Performance by Sector

In the review period, sub-index of insurance sector has increased 472.50 points or 15.31 per cent to rest at 3085.45. Similarly, sub-index of hotel sector added 243.25 points to reach 159.21 followed by hydropower sub-index (259.84 points to close at 2316.37). In the mean time, sub-indices of development bank and banking gained 37.02 points and 25.11 points respectively. Most of the other sub-indices remained green for the review period while the 'Others' sub-index remained stagnant with no changes. 

 

The sensitive index that measures the performance of “A-Class” stocks under Nepse went uphill 9.07 points or 5.20 per cent to rest at 174.42. Similarly, Float index that measures the performance of publically floated stocks ascended 3.06 points or 5.57 per cent duting the period to settle at 54.95. Total of 12.92 million units of shares, worth Rs 6221.1 million, have been traded through 43,870 transactions. Of the total turnover, commercial banks accumulated 37.80 per cent while insurance sector and hydropower sector respectively grabbed 24.55 per cent and 19.38 per cent. Remaining sectors covered rest of the turnover. 

 

Technically, the Simple Moving Average (SMA) of short term has moved higher than long-term one. This suggests that a small correction may be seen at this level. As indicated by pivot analysis, the benchmark index is expected to face resistance at 831.73 and then 851.99 levels while support is expected at 778.06 and 744.65 at the lowest.

 

 

Chitrakar is a Stock Analyst with Jamb Technologies Pvt Ltd.