Has the Time to Be Optimistic Come?

Article By: Rojin Joshi

A Stock Market Fanatic

 

 

In this article I express my opinion that a pessimistic environment which hovered in the market for around 3 years is over and we can become quite optimistic now so I will not get into much detail and explain why and how the markets will rise or can we expect a bull market or not also what policies the government must introduce to boost the confidence of the investors (it would make this article very lengthy, we will discuss those details in the future), the main thing I want to discuss here is that the 3 year long pessimism is over and as long as this government is present we can invest/trade with confidence and optimism.

The downtrend in NEPSE also started soon after the fall of the then Oli government and the formation of a new government under the leadership of Sher Bahadur Deuba. I firmly believed that we would be seeing the NEPSE index touch the 4000 mark and the bull rally would not end before that so for those people who think that the change in government was not the reason for the downtrend, a bubble was formed in the market and a burst was imminent I am still adamant on my belief that a huge correction or burst or bear phase/rally would never have started before the market touched the 4000 mark, and it would have surely achieved the feat if the then government had not fallen.

After some time the new government took office it became clear that the market will be suffering be it because of the tussle between the new government and the governor or because the new government could not create confidence among the investors with its policies. The investors somehow managed the suffering for 16 18 months and were optimistic that after the elections of 2074 Mangsir the markets will improve but I was sure that we cannot be hopeful and optimistic as long as the same coalition takes the office again after the elections. The market and the investors need confidence and it is only possible if the previous duo of K.P. Oli and Bishnu Paudel are back as the PM and FM respectively after the elections but that also didn’t happen back then. It has happened today and not only the duo but the trio of PM, FM and the governor of NRB is also the same as it was during the bull rally.

If we look at the above picture we can clearly see that the market responded positively to the news of formation of the new government, the agreement between the 2 parties was signed on the midnight of 17^th of Asar (1^st of July) and when the market opened after this agreement i.e. on 18^th of Asar (2^nd  of July) the market hit 2 circuit breakers (of 4% and 5%) and it was presumed that it would hit the third circuit breaker of 6% and close for the day but as the news came that PM Dahal would not be resigning and has decided to face the Parliament and try to obtain the vote of confidence, investors became a bit skeptical or rather sad that they would have to wait for another 10 15 days to see Bishnu Paudel in the finance ministry so the market which was up by more than 100 points made some intraday correction and closed with a gain of 47 points. We can also see that on the 17^th of Asar (1^st of July) also market closed on green after previously closing on red for 3 consecutive days. The market behaved positively for 9 out of 10 trading days since the formation of new government was imminent and the index is up by about 200 points. The last graph on above’s picture shows that market closed with a gain of 52 points (with an intraday gain of 85 points) after it opened for the first day after PM Dahal failed to obtain the confidence of the Parliament and any doubt/skepticism regarding the formation of Oli government was over.

Do we need to worry after the market’s performance of today (15^th of July)?

No, the market corrected by a mere 17 points after a rise of more than 200 points so I don’t see today’s performance anything other than normal. The ups and downs of markets are a natural phenomenon so we need not to worry about today’s loss and also if it closes in red tomorrow (which is less likely to happen). For me, the pessimism which lasted for more than 3 years is over and we can become optimistic and invest or trade with confidence. 

My assumption of the NEPSE index

I didn’t want to make an assumption of the index today but this article won’t be able to portray its essence without being overly lengthy without mentioning a numerical figure (also I assume that the majority of readers would want to see a numerical figure). My assumption is that if this government sits in the office for around 15 to 18 months we could see the NEPSE index breaking the previous ATH (all time high) and reach up to 3500 points. The ‘status quo’ (even if no policies that help the market are introduced policies hurting the market shouldn’t be introduced) is enough for this to happen, the further high of market depends on the policies of the government and its perception of the stock market.

What will drive the market upto 3500?

• Bishnu Paudel as the FM.
• Lowering interest rates (Savings, FDs and Loans)
• Liquidity
• Upcoming monetary policy