NEPSE Index Continues Sharp Fall, Down 20% From All-Time High (Weekly Sector Analysis, Broker Comparison, Major Market Movers)

Fri, Mar 4, 2022 3:51 PM on Stock Market, Weekly Analysis,

-ShareSansar

Part 1: Rundown and Technical Analysis

There were only three trading days this week. The index closed red in all three days. NEPSE was closed on Tuesday on the occasion of Shivaratri and on Thursday on the occasion of Gyalpo Lhosar. The market is closed on Fridays and Saturdays every week.

The NEPSE index closed at 2,547.04 this week after a loss of 63.54 points (-2.43%). The index had closed at 2,661.44 last week with a loss of 2.6% from the week before that.

This week, the index went as high as 2,612.51 and as low as 2,542.77, hence witnessing volatility of 69.74 points. In the previous week, the index had seen volatility of 95.11 points.

Analysis of Trend

The NEPSE index is up only around 3% compared to the same date last year. It is down around 20% from the all-time high of 3,198.60 created around five months ago and down around 13% from the most-recent pivot high.

Candlestick Charting

On the weekly candlestick chart, this week's market movement has formed a long red candle with shorter wicks. Last week's candle was a small red candle with a longer upper wick and a short lower wick.

The first trading day (Sunday) this week saw bearish momentum, and the daily candlestick was short, red with a loss of 7.74 points. The index lost heavily in the next two days.

Momentum Indicators

The relative strength index (RSI) is a momentum indicator used in technical analysis that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock or index. Traditional interpretation and usage of the RSI are that values of 70 or above indicate that a security is becoming overbought or overvalued and may be primed for a trend reversal or corrective pullback in price. An RSI reading of 30 or below indicates an oversold or undervalued condition.

The RSI reading on the daily timeframe is 29.62. The daily RSI chart has sloped downwards this week, indicating a gradual decline in optimism. The daily RSI reading crossing below the 30 mark indicates oversold conditions in technical analysis.

Meanwhile, the RSI reading on the weekly chart is 43.27, which has also been downwards sloping for the last seven weeks. However, it should be noted that indicators have a lagging nature, and a single indicator can't be used to gauge market sentiment.

On the other side of things, the MACD line is negative, i.e. below zero in the daily timeframe, with the MACD reading at -9.13. It had started sloping downwards from the last three weeks. The MACD line is also below the signal line, indicating a bearish sentiment.

Volume

A chart reader can deduce investor sentiment with volume. Essentially, trading volume can legitimize a security's price action, which can then aid an investor in their decision to either buy or sell that security.

During market falls, the volume is dry and during bullish days, there is a general increase in volume.

This week, volume was the lowest on the first trading day. Market participation climbed on the second trading day and declined slightly on the last in the three trading days this week.

Support/ Resistance, Price Action

First and foremost, there is no rigid rule to deduce support and resistance levels from a stock/ index chart. Technical analysis is more an art rather than hard science since it is an attempt to deduce market psychology after all. As is the case with human behavior, markets are largely unpredictable, subject to whims and instance changes in sentiment. The best a chart reader can do is deduce investing strategies using what has worked historically, and what gives a competitive edge even in securities other than those present in the sample data.

The resistance level is simply the price above which the index has had trouble moving up. Thus, the previous high (or a series of highs if they are on the same level) can be used as resistance. Meanwhile, if the stock or index chart has gone below the previous low, it can also be inferred as a resistance level, since the previous support level acts as resistance if the price/ index has broken below it.

Immediate resistance may be seen at the 2,670 and the 2,760 index levels, analyzing the previous crucial pivot points.

On the other hand, the support level is simply the price below which the index has had trouble moving down. Thus, the previous low (or a series of low if they are on the same level) can be used as support. Meanwhile, if the stock or index chart has gone up the previous high, it can also be inferred as a support level, since the previous resistance level acts as support if the price/ index has broken above it.

The index seems to be venturing very close to a strong probable support region from 2,484 to 2,542.

Macroeconomics, Political Scenario

Russian President Vladimir Putin launched a full-scale attack against Ukraine on Thursday last week. Russian missiles and airstrikes hit Ukraine’s capital, Kyiv, and more than a dozen other cities across the country Thursday. This came minutes after Russian President Vladimir Putin announced a military operation "to demilitarize and denazify Ukraine” and bring its leaders to trial.

The Russian Defense Ministry confirmed a substantial number of casualties in Ukraine, announcing that 498 Russian troops have died and 1,597 more have been injured. Russian Defense Ministry spokesman Igor Konashenkov said that among Ukrainian troops, 2,870 have been killed, around 3,700 injured, and 572 captured.

As a result of this, energy prices and the price of gold have increased nationally and internationally. The price of edible oil has also risen. All these are believed to have been caused in part by the international political crisis and partly by rising inflation in the country.

Back at home, the Millennium Challenge Corporation has been ratified by the Parliament. The U.S. foreign assistance, although controversial and divisive among some groups, has been ratified with the majority decision of the Parliament.

Part 2: Insight into Important Data

More than 2.25 crores unit shares worth Rs 10.55 Arba have been traded through 1.59 lakh transactions this week. The current market capitalization of NEPSE stands at Rs. 3,607,608 million.

(NOTE: The turnover, traded shares, and number of transactions are lower than the previous week because this week had only 3 trading days)

**NEPSE index and Sub-indices performance: (Increment based on previous week's close)**

The NEPSE index declined by 4.30% this week. All the sectors lost this week

Stocks with highest monthly Beta (Microfinance, Hydropower, Non-Life Insurance)

Wean Nepal Laghubitta Bittiya Sanstha Limited (WNLB) has the highest monthly Beta value of 1.37 followed by Forward Microfinance Laghubitta Bittiya Sanstha Limited (FOWAD) and Chhyangdi Hydropower Company Limited (CHL) with 0.79 and 0.60 beta values respectively.

Top Ten Gainers of the week:

Reliance Life Insurance Limited (RLI) is the top gainer of this week. RLI closed at Rs. 572 with Rs. 24 (4.38%) increment.

All the analysis is done with the SS Pro Software. To know more about the software, click on the link below

SSpro

Top Ten Losers of the week:

Terhathum Power Company Limited's (TPC) price has decreased by 18.39% and its LTP stands at Rs. 151.

Top Stocks by Turnover, Volume, and Number of Transaction:

Nepal Doorsanchar Company Limited (NTC) is the top traded company of the week. A total of Rs. 44.22 crores worth of NTC shares were traded this week.

Top Buyers Brokers of the Week:

Naasa Securities Co.Ltd (Broker No- 58) was the top buyer broker of this week and it has bought stocks worth Rs 62.83 crores.

Top 10 Bought Companies:

Top Seller Brokers of the Week:

Imperial Securities Co. Pvt. Limited (Broker No- 45) was the top seller broker for this week. The brokerage firm has sold stocks worth Rs 57.36 crores.