(Nepal Stock Market Review for 22 Aug – 20 September, 2011)

By Bikram Chitrakar

The Nepse Index needs to cross 350 to inspire the investors, shows this analysis. With Nepse Index continuously sliding down, the month striding over August-September period was a month of decline in the Nepali bourse. This was in spite of healthy earnings reports and dividend declaration by the companies. The entry of Maoists as the leader of the government helped in sending the mood in the exchange down because of lack of clarity about the policy of the new government. The benchmark Nepse index plummeted 29.76 points or 9.30 per cent to respite at 320.08 during 22 August-20 September. While the highest points for the period was on 22 August with 349.84 and the lowest was on 19 September with 317.70.

Investors were unsatisfied with the rate of dividend declared by different financial institutions as the proposed dividend could not meet the expectations of the investors. Dividend proposed by Standard Chartered Bank is 50 per cent (cash) while that of Nabil is 30 per cent (cash) only. Both missed the expectation of the investors.

However, the investors have not lost all the hopes as yet because the process to improve the regulatory environment is still going ahead. The Securities Board of Nepal (SEBON) has granted license to Central Depository System and Clearing Ltd as per CDS regulation 2067. Now it is expected to start operation after the Dashain festivals are over. Similarly, the newly licensed 16 stock brokers also started transactions. With this the number of stock brokers has increase to 39, providing the investors expanded opportunity to choose their broker.

Another noteworthy event of the month was the Money Expo organized jointly by Aarthik Abhiyan and Jamb Technologies with Minds Nepal and Morningstar Investment Services Pvt. The 3-day event called "NDEX Money Expo 2011" concluded on September 14 is believed to have helped to promote investment opportunities and tools. Experts from both India and Nepal participated in various discussion programs held during the Expo on topics related to the economy, stock market, commodity market, central depository system, investment banking and so on. In one of the programme, Tanka Prasad Paneru, chairperson of Nepal Stock Exchange opined that the Nepali stock market on that week was in a correction phase and it will gallop after crossing that level. 

Performance by Sector

Commercial banking sector holding the heavy share of trade volume in Nepal Stock Exchange dived down 44.32 points or 16.24 per cent to settle at 272.95 during the review period. Insurance sub-index lost 20.75 points to come down at 398.73. Similarly, hydropower sector descended 18.14 points along with 15.80 points decline in finance sector to arrive at 549.23 and 276.24 respectively. Others sector plummeted 8.23 points or 1.74 per cent to close at 472.34 while development bank group ebbed out 5.97 points to rest at 279.92. However manufacturing sector added 20.24 points or 3.33 per cent to reach 607.47 while trading sector gained 4.11 points to rest at 246.08.

Sensitive index that measures the performance of 117 blue chips scrip at secondary market lost 8.73 points or 11.19 per cent to reach 78.01 while the float index calculated on the basis of real transaction skid 3.31 points to arrive at 26.38. Total of Rs. 493769430 was realized during review period from 2279903 units of share trade via 25195 transactions.

The accompanying figure demonstrates the sector-wise distribution based on total amount of trade. Banking sector accounted for 58.87 per cent of total trade followed by development bank sector (13.49 per cent) and finance sector (8.10 per cent). The rest was accounted by the remaining sectors.

Technically, Simple Moving Average (SMA) is shabby in both long term and short term. Both 30 days SMA and 200 days SMA are dominating the market with no clue of further correction shortly. Breaching the level of 350 is required for acceleration.

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