Nepal Stock Market Shows Slight Recovery: In-Depth Analysis
Author
NEPSE trading
After four consecutive days of decline, the Nepal Stock Exchange (NEPSE) index closed with a marginal improvement on the last trading day of the week, Thursday. The NEPSE index rose by 2.08 points to settle at 2658.02. While this modest recovery signals some positive sentiment, analysts note that investors remain cautious. This article provides a comprehensive analysis of the market's performance, technical indicators, broker activities, and external factors influencing the market.
Trading Volume and Market Dynamics
On Wednesday, the market recorded a trading volume of NPR 7.57 billion, which increased slightly to NPR 7.87 billion on Thursday, marking a 3.99% rise. However, this volume remains lower than the levels seen during previous bullish trends, indicating a lack of robust investor confidence. The market displayed mixed signals, with investors showing interest in small and mid-cap companies, while selling pressure persisted in large-cap stocks.
Sectoral Performance
Out of the 13 sub-indices, 5 recorded gains, while 8 saw declines on Thursday:
Investment Sub-Index: Led with a 2.29% increase, reflecting growing investor interest in investment companies.
Banking, Hydropower, Mutual Funds, and Trading: These sub-indices saw marginal gains, indicating sustained investor interest in these sectors.
Hotels and Tourism: Declined the most by 1.16%, likely due to economic uncertainties and seasonal factors impacting the tourism sector.
Positive and Negative Circuit Breakers
Positive Circuit: Shares of Nepal Micro Insurance Company and Crest Micro Life Insurance hit the positive circuit level, reflecting strong fundamentals and investor confidence in microfinance and insurance sectors.
Negative Circuit: Nepal Hydro Developers saw its share price plummet by 7.12%, driven by weak financial performance and broader market uncertainties affecting the hydropower sector.
Top Traded Stock: Ngadi Group Power topped the trading volume with NPR 703.49 million worth of shares traded, signaling continued investor interest in select hydropower companies.
External Factors Impacting the Market
The market faced a pessimistic outlook at the start of the week due to several factors:
Delay in Governor Appointment: Uncertainty surrounding the appointment of the Nepal Rastra Bank governor has raised concerns about monetary policy direction.
Protests by Teachers and Civil Servants: Threats of agitation have fueled fears of disruptions in government policies.
World Bank’s Projection: The World Bank’s forecast of subdued economic growth in Nepal has made investors cautious.
Weak Bank Financials: Most commercial banks reported weaker-than-expected quarterly results, dampening sentiment in the banking sector.
Thursday’s slight recovery has sparked some optimism, but analysts emphasize that sustained stability requires policy reforms, a conducive investment climate, and robust economic measures. The upcoming fiscal year budget and the policy and program announcement on May 2, 2025, are expected to influence market sentiment positively.
Technical Analysis
The NEPSE index recently broke below the middle Bollinger Band (2676) and is currently near the 200-day Moving Average (MA) support level at 2631.8. Key technical observations:
Support Level: A breach below 2631.8 could push the index toward the lower Bollinger Band (around 2500), signaling a bearish trend.
Resistance Level: A breakout above the middle Bollinger Band (2676) and the 50-day MA (around 2685) could indicate a strong recovery.
Volume and RSI: While trading volume saw a slight uptick, selling pressure persists. The Relative Strength Index (RSI) hovers around 45, in neutral territory, reflecting ongoing market uncertainty.
Investor Advice: The current market offers opportunities in small and mid-cap stocks, but caution is advised for large-cap investments due to persistent selling pressure.
Broker Activity
An analysis of the top 10 brokers reveals a dominant selling trend:
Broker No. 58: Recorded NPR 371.1 million in buys and NPR 382.7 million in sells, leading in selling activity.
Broker No. 45: Saw NPR 184.9 million in buys and NPR 195 million in sells, indicating a selling bias.
Broker No. 34: Recorded NPR 157.5 million in buys and NPR 197.5 million in sells.
Broker No. 49: Bucked the trend with NPR 120 million in buys against NPR 60 million in sells, showing a net buying interest of approximately NPR 60 million.
Broker No. 42: Maintained a near-balanced buy-sell ratio.
This data underscores the cautious approach of major brokers, with most prioritizing sales, further contributing to the market’s uncertain environment.
Future Outlook
The upcoming fiscal year budget and the policy and program announcement on May 2, 2025, are anticipated to provide clarity and potentially boost market sentiment. Key areas to watch include:
Monetary Policy Clarity: A clear direction on interest rates and liquidity could restore investor confidence.
Support for Hydropower and Manufacturing: Policy measures to promote these sectors could drive market growth.
Global Economic Trends: External factors, such as global interest rate movements and commodity prices, will also influence the market.
Investor Recommendations:
Focus on companies with strong fundamentals for long-term investments.
Monitor support and resistance levels closely for technical trading strategies.
Exercise caution with small and mid-cap stocks until market stability is restored.
While the Nepali stock market has shown signs of a modest recovery, sustained growth hinges on policy stability and a favorable investment climate. Investors are advised to remain vigilant and strategic in navigating the current uncertainties.
