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July 2015 Stock Taking

Published on: 2015-07-21 00:00:00     929 times read    0  Comments
As the earthquake has destroyed property and hampered trade, consumption, investment and living patterns of the people, business activities have been hampered. However, the exact loss can be assesses only after the coming quarterly reports of the listed companies.
 
--By Bikram Chitrakar
 
The sole secondary market of Nepal escalated with the key consensus among major political parties on constitutional issues. The benchmark Nepse index gained 47.60 points, or 5.41%, to rest at 928.13 while the highest point was on 9th June with 966.59 which nearly 3 months high was and lowest was on 27 May with 837.83. 
 
Market was opened nearly after a month of cooling down due to massive earthquake that tumbled the major economic hub of Nepal including the capital city. It was closed down for nearly a month as investors were psychologically disturbed and the physical infrastructure of the market was partially damaged due to the earthquake of 25 April.
 
Nepal Stock Exchange (NEPSE) postponed the trading dates stating that its stakeholders i.e. Central Depository System and Clearing Ltd. (CDSCL), the brokers, the registrars to share and investors were not ready for trading.
 
The building of the Central Depository System and Clearing Ltd was damaged by the earthquake raising question on the preparation and readiness of the Market participants to disaster management and recovery. 
 
Some investors too were in favour of closing down the market in fear of sudden crash due to panic selling. But other investors viewed the liquidity aspects of the secondary market and argued for its opening so as to provide opportunity for those investors who were in need of cash due to earthquake. Though halting the market for a short period after a disaster is normal, prolonged close down harms the traders who live in the margin (stop frequent loss) and the small investors who put money in the stocks hoping immediate cash realization when needed (liquidity freeze). 
 
Nevertheless, as the earthquake has destroyed property and hampered trade, consumption, investment and living patterns of the people, business activities have been hampered. However, the exact loss can be assesses only after the coming quarterly reports of the listed companies. So, the analysts view that the upcoming quarter’s reports will give clues as to the direction of the capital market. Therefore, for the immediate future, the market is expected to move sideways. 
 
 
Performance by Sector
Amid review period, others sector booked the highest gain by adding 11.01% while hydropower sector went uphill 10.65%; and insurance increased by 8.16%. Manufacturing sector accelerated 6.15% followed by 6.05% up in trading sector. Commercial banks surged by 5.66%, however hotels, development banks and finance sector turned red by 6.18%, 1.52% and 1.26% respectively.  
 
The accompanying pie-chart shows the sectoral distribution in relation to total volume of trade. As usual, most of the trade was dominated by commercial banks. Commercial banking sector occupied 62.25% of total trade. Insurance sector accounted for 12.79%, development bank 10.26% and hydropower sector 8.46%. The rest of the portions were made up by remaining sectors. 
 
Technically Simple Moving Average (SMA) shows that the index gained in monthly basis and shows no sign of correction in immediate future. Pivotal analysis indicates that the higher range lies between 947.36 to 1011.74 and lower range between 921.44 and 857.06
 
Chitrakar is a freelance Stock Analyst.

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