(Review for 20 Dec, 2010- 19 Jan, 2011)

By Bikram Chitrakar

The Nepali share market was filled with some optimism after closing the review period at the highest point as the political situation looked like improving. That was supported by the hope that the financial reports for second quarter of the fiscal year from the listed companies will show improvement in their performance. The benchmark Nepse index advanced 12.98 points or 3.21% to settle at 404.33. The session's high was on 27 December, 2010 with 407.72 while session's low was at the opening with 391.35 on 20 December, 2010.

The understanding reached between major parties to bring the Maoist combatants under the Special Committee headed by the Prime Minister has added hope that the peace process is heading towards the right direction. However investors were cautious as the formation of the new government is still uncertain.

However, some hopeful developments are reported also from the regulators side. For example, Securities Board (SEBON) has formed a committee under the leadership of its Chairman Dr. Surbir Poudyal to formulate a five-year master plan to develop the securities market with technical assistance of the World Bank. Similarly, Nepal Stock Exchange (Nepse) has formed a company CDS and Clearing Ltd as a subsidiary to introduce and manage the central depository system. Though another company called Nepal Central Depository and Clearing Ltd was formed earlier with Nepse and the commercial banks as the shareholders, that company could not go ahead due to dispute between Nepse and the commercial banks about how to account for the Indian assistance received for this purpose.

Performance by Sector

The commercial banking sector which holds the largest share in the trade volume in Nepal Stock Exchange gained 23.75 points or 6.41% to close at 370.77 during the review period. Similarly, hydropower sector was up by 32.33 points to rest at 717.09. Hotel sector accelerated 18.81 points or 4.16% to settle at 452.36 while manufacturing sector went up 7.78 points along with 4.71 points growth in tradings sector. Insurance sub-index went up 3.49 points while others sector increased 2.35 points to close at 477.38 and 522.85 respectively.

 
Sensitive index that measured the performance of 94 blue chips surged 3.78 points or 3.79% to 99.76 while, the float index calculated on the basis of real transaction ascended 1.02 points to 34.58. Total of Rs 492,513,784 was realised during the review period from 1,985,844 units of shares traded via 30,739 transactions.

 The accompanying figure depicts the sector-wise distribution based on the total volume of trade. As usual, majority of the trade was in the banking sector with 46.60% while finance sector accounted for 21.55%. Development bank occupied 15.27% and the remaining sectors made up for the rest.

 
Technically, Simple Moving Average (SMA) is performing high in the short term. However its sustainability is not supported by transaction volume. Shortfall in the volume of trade may lead the index down while it is still gloomy in the long term.

(The writer is a stock analyst with Jamb Technologies Pvt Ltd)