NEPSE Shows Signs of 'Reversal'!

Green Inverted Hammer Candle Formed in the Market, Second Consecutive Day of Uptrend, Beginning of a New Uptrend!

The Nepal Stock Exchange (NEPSE) has shown signs of improvement after a continuous downward trend. Recently, NEPSE had dropped below 2800 after crossing the 3000 mark. During this period, various negative news had impacted the market. Factors like unnecessary broker limits and microfinance companies facing capital constraints were seen to have a negative effect on the market. However, as brokers have started loosening their limits and other economic indicators are turning positive, investors are optimistic about a market recovery. Analysts have mentioned that for the market to cross the 3200 mark, some significant news is needed. Also, if margin trading becomes spontaneously operational, it could bring a boost to the market. Currently, brokers are not the only ones capable of margin trading, but if linked with banks, the brokerage limits could be reduced, which would support the market above 3200.

NEPSE Market Performance

NEPSE closed in the green again on Tuesday. After a modest increase on Monday, the market continued its upward journey on Tuesday. On Tuesday, NEPSE gained 9.76 points, reaching 2780.15 points. The Sensitive Index increased by 2.73 points, reaching 497.34 points. Similarly, the Float Index rose by 0.59 points, reaching 196.75 points, and the Sensitive Float Index also increased by 0.68 points, reaching 167.66 points. Despite the improvement in the indices, the trading volume decreased compared to the previous day. On Monday, the market saw a trading volume of NPR 6.17 billion, while on Tuesday, the trading volume was limited to NPR 5.63 billion with 1.31 million shares traded across 316 stocks. This suggests a decrease in investor enthusiasm.

Top Performing and Falling Companies

The top gainer on Tuesday was Sanvi Energy, whose share price rose by 6.98%. Similarly, Pure Energy’s share price also increased by over 6%, and Eastern Hydropower’s price rose by more than 4.5%. On the other hand, Narayani Development Bank experienced the most significant loss, with its share price falling by 6.14%. United Modi Hydropower's share price also dropped by more than 4%.

In terms of trading volume, United Modi Hydropower was the leader, with about NPR 31.72 million in shares traded. Himalayan Distillery followed with nearly NPR 28 million in trades, and Radhi Hydropower also saw over NPR 20 million in trading.

Sector Performance

Among the 13 sub-sectors, 12 showed an upward trend, while 1 sub-sector, the Hotel and Tourism sector, saw a decrease of 0.24 points. Despite growth in most sub-sectors, the growth rate was less than 1%, indicating a balanced yet slightly positive sentiment in the market.

Technical Analysis: Market Gaining Strength

Technically, the market is showing signs of strength. Some analysts claim that investors are entering the market after the formation of a single candlestick pattern. However, the single candlestick pattern hasn't yet given a clear 'buy' signal. Furthermore, big money investors are also believed to be increasing their stake.

According to technical analyst Ajit Khanal, the NEPSE index is showing positive signals after taking support from the 50-day moving average and the 61% Fibonacci retracement level. On Tuesday, the market formed a green inverted hammer candle, which, according to technical analysts, is typically interpreted as a 'reversal' signal in a downtrend. The formation of green candles over the last two days indicates that the market is recovering. However, despite the upward movement, the trading volume hasn't increased as expected. On Tuesday, the trading volume was the lowest since May 21.

Broker Activity

Among the top 10 brokers, 6 are seen to have sold more shares than they bought. This suggests that the current 'rebound' in the market is not solid yet. Investors are now waiting for the market to close above Tuesday’s high. If the market breaks through this level and closes higher, analysts believe it could mark the beginning of a new uptrend. However, until the trading volume supports the market, it will be difficult to consider this as a long-term positive signal.