The secondary market of Nepal, Nepal Stock Exchange (Nepse), plummeted in the review period erasing its early gains. The four-month-late budget was expected to boost up the faded stock market. But that could not happen. The Nepse index went down 6.70 points or 1.60 per cent to settle at the review period's low of 419.63 while the highest point of the period was 426.33 on 24 Oct.

During the review period, most of the companies declared their dividend and book closing date and published first quarter financial reports and company analysis. Hence, it can be expected that a great momentum is not going take place very soon as the investors will take time to analyse and interpret the health of institutions and their future prospects.

The outflow of fund during the time of Dashain and Tihar has also hampered the capital market of Nepal, as banking sector is facing liquidity crisis while the lending rate between the banks has also picked high. Hence, spending and withdrawals made at the festival time have affected the investing capacity of the investors. On the other hand, different banks have already declared their revised interest rate on the deposits attracting the investors to hold the capital and deposit it at the bank rather than investing in the market.

The budget for the fiscal year 2010/11 delayed due to political wrangling among Nepal is and provided some ropes for merger between different financial institutions and insurance companies. However, it has not addressed cut and dry approach for uplifting the stampeded stock market of Nepal.

The much awaited Nepal Central Depository and Clearing Ltd was registered. Nepal Stock Exchange, Citizen Investment Trust and 17 commercial banks have signed the Memorandum of Association of the company as the founder shareholders. Nepse has 51 per cent, CIT has 15 per cent, six commercial banks have 2.88 per cent each while the rest stake in this company is held by 11 commercial banks. The operation of Central Depository System (CDS) will replace the current scrip-based manual system of trading. It will be introducing computerized book entry system cutting the transaction time and facilitating prompt trade.

The trial operation of the CDS system will be made in January 2011 as the software will be handed over by Tata Group by December 15, 2010. The taste of new improved system will surely cure some of the ills of the market; however, political and economic conditions till that period will also determine the sentiment of the market.
 

Performance by Sector

Banking sector, accumulating the heavy volume of trade in Nepse, experienced a double digit dip of 10.77 points or 2.76 per cent to close at 389.68. Similarly, hotel sector plunged 8.66 points followed by 7.64 points down in development banks to settle at 402.48 and 400.11, respectively. The ‘others sector’ skidded 2.35 points while hydropower sector lost 1.89 points. Trading sector descended 1.72 points or 0.65 per cent to close at 265.15. However, insurance accelerated by a fast 34.51 points or 7.02 per cent to settle at 491.75. Finance sector spread the modest of 0.02 points or 0.01 per cent to rest at 357.07.

The sensitive index that measures the performance of 94 blue chips scrip at the secondary market, drifted down 2.33 points or 2.27 per cent to 102.58 while the float index calculated on the basis of real transaction, receded 1 . 2 4 points to 36.5. Total of Rs. 471,129,498 was

realized during the review period from 1,656,453 units of share traded via 26,545 transactions.

The figure on the previous page depicts the sectorwise distribution based on the total amount of trade. The commercial banks accounted 50.45 per cent while finance sector covered 14.53 per cent. Similarly, development banks held 13.97 per cent, insurance occupied 9.25 per cent and hydropower sector retained 8.32 per cent while the remaining sectors made up the rest.

Technically, both the 200 days Simple Moving Average (SMA) and 30 days SMA are above the Nepse index, as the market has retreated from its previous surge. Nepse index is overlapped with 30 days SMA showing the shabby nature of stock in the short term while in the long term it is weak. Hence, the chance of acceleration in the market is not visible; however, a few fluctuations can be expected in the short term. (The writer is a stock analyst)