By Bikram Chitrakar

 

The Nepali share market had a lacklustre performance also in the month during March 20-April 19 despite the inauguration of eagerly awaited Central Depository System and Clearing Ltd. Also the prospect of good third quarter financial results did not help the market sentiment. The benchmark NEPSE index dropped 15.16 points or 4.16% to settle at 364.3 points. The session's highest was on 21 March with 379.46 while the session's lowest was on 29 March with 358.04.

Central Depository System (CDS) and Clearing Ltd was formally inaugurated on 31 March, 2011 which was keenly expected by the investors of Nepal. Despite its opening, the market could not take off as investors were more worried about the scenario after the May 28 deadline for promulgation of the country’s new constitution lapses.

 

The automated system of CDS will facilitate speedy and safe clearing and settlement of transactions. The safety and security of the digital holding of shares will eliminate fraud and misuse of share certificates while the flow of shares will increase in the market due to instant transfer. One reaction of the market to the new development is that heavy volume of scrip was traded through matching , particularly towards the first half of April. The trade volume during the period was higher than the average despite the index closing at a lower level. The increased cases of matching during this period is explained by the fact that matching is going to be difficult under the CDS system. Therefore, the investors who had bought shares in the IPOs under fictitious names were transferring such shares on their real names and in doing so they pressed the prices lower to reduce the capital gains tax. 

 

Securities Board of Nepal (SEBON) organised an interaction programme during the month about the regulation it has drafted to allow setting up credit rating agencies in Nepal. This draft now needs to be approved by the Ministry of Finance beofre they can go for implementation. After the establishment of these agencies, the issues (IPO, rights) exceeding Rs. 100 million size will have to be rated by such agencies before they are floated to the public.

 

 

Performance by Sector

Commercial banking sector that accounts for the highest volume of trade in the exchange lost 27.73 points or 9.01% to settle at 307.73. Manufacturing and processing sector dropped 25.54 points to 500.59. to close at 434.83 and 312.1 respectively. Insurance sub-indices lost 17.30 points to settle at 448.83 while finance sector plummets 5.70 points or 1.83% to close at 310.91. However, the hydropower sector gained 71.22 points or 9.80% to settle at 726.97.

 

A total of Rs 492,513,784 was realised during the review period from 1,985,844 units of share trade via 30,739 transactions.

 

The accompanying figure shows sector-wise distribution based on the total amount of trades. The commercial banks accounted for 44.20% whereas the insurance sector constituted 16.35% which is more than that of the finance companies which stood at 14.80%. Similarly, the development banks hold 13.80% while rest of the sectors covered the remaining portion of the trade.

 

Technically, the Simple Moving Average (SMA) is dominating the market as both 30 days SMA and 200 Days SMA are above the trend line. It indicates possibility of a further downfall.

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