Selling Spree
By Matrika Babu Pokhrel & Pratistha Bhurtel
April ’09 in the Nepali stock market started off
with a slight smack and continued to tread over
the pessimistic zone for the whole month. Few
insignificant upsurges and a lot of downturns characterized the market during the month. The continuous political flux along with disappointing government policies was enough to dampen the investor’s enthusiasm towards the share market. Moreover, the IPO (Initial Public Offering) allure has drifted a large part of investment toward primary market, hence reducing the charm of the secondary market. Much extended bear market tapped its toes with extra aggression, hence taking away 26.28 points from the benchmark index to let it close at 649.04 on April 26 from 675.30 on March 25.
The market skid down as majority of the sectors lost their footing with few jotting a severe slump. Others group (Open: 657.94 High: 599.21 Low: 599.21 Close: 599.21) plunged by 8.92% as its underlying scrip - Nepal Telecom made a swift fall over the month. Development bank (O: 870.76 H: 875.46 L: 823.55 C: 823.55) and finance (O: 772.18 H: 772.98 L: 736.60 C: 736.60) gave away 5.42% and 4.60% respectively followed by insurance (down -1.11%) and hydropower (down 3.03%) groups. Banking rolled down to close at 651.39 from 669.71 with a drop of 2.73%. However, hotel (up 2.89%), manufacturing (up 3.99%) and trading (up 1.96%) registered moderate surge.
Amid the swelling supply pressure, the blue chip scrips also lost their hold as evident by 2.61% plunge in sensitive index. Likewise, float index – calculated on the basis of real transaction, descended by 1.99 points or 3.03% to rest at 63.55.
Red shades engulfed the market this month with losers ruling over. Out of 125 companies in the trading floor, 26 bolstered their performance and 73 came down. A total of 1,236,517 shares changed hands via 19,488 transactions. The turnover was Rs. 890,273,216.
Psychology is probably the most important factor in the market – and one that is least understood. Some positive moves were expected during the later phase of the month as the third quarter financial reports were unveiled but the downtrend still persisted. Investors seem to give more weight to the uncertainties in the political field. All the adversities at hand have overshadowed the lustrous profits revealed by most of the companies in their third quarter reports. Moreover, the right shares forwarded by number of companies have fueled the selling spree. Furthermore, the inflation is still around 14% and there is no sign of ease in this situation. On top of this, there is the renewed worry about the stagflation.
The market price in the month was dominated by 200 day’s Simple Moving Average (SMA), which indicated that the investors are aggressively selling their stocks. The short-term traders remained active all through the month. Few upturns realized were the result of series of short-covering rather than the full-fledged buying.
The accompanying figure shows sector-wise distribution based on total amount of trades. Amongst the total amount transacted this month, commercial banks accounted for 53%. Likewise, development bank (19%) and finance (22%) got big chunk of the transaction. Meanwhile, hydroelectricity stood at 7% and others remained at 3% followed by 2% coverage by insurance and mutual fund each.
