What next with the NEPSE??

The big question that arises on most of the investor’s mind now is “How much will the NEPSE index fall and from where it might bounce back?” And the answer is much more difficult to predict.

The NEPSE Index was ranging between 975 and 937 for almost 2.5 months before index finally break the strong support of 975. The index tested the level of around 975 for three times (including the intraday index) but it could not sustain and finally break down the support to go for downward trend.[ as seen in the rectangular box]

There are basically two reasons for the downward trend of NEPSE index.

1. The deteriorating political environment  and no sign of consensus among political parties in near future
2. The huge confusion regarding the implementation of CDS and some procedural uncertainties on loans on BT through demat shares.

Because of these reasons the investors’ confidence is on the all time low since the constituent assembly election-2

WHAT NEXT?

Though Technical analysis of stock index is not always correct but still it gives some information to sketch the picture of future.

Technical analysis shows the next support level at 831 and if it is also broken 800 will be strong and psychological support for NEPSE index. (as shown by two parallel lines).  There is strong chance index might bounce from these levels. The Relative Strength Index RSI is now on the oversold zone as the RSI below 30 is considered as oversold zone.(indicated by the circle)

The way ahead

The financial market environment is still very conducive to the stock market as there is not the shortage of liquidity in market and the bank interest rates are on the minimal side and there is no sign on the increment of bank’s interest rate. So the only stock market of Nepal “NEPSE” is due to bounce from this downfall in near future. All the concerned stakeholders need to take positive steps for the development of stock market. Though the Political stability is not on the hands of general investors, but NEPSE, SEBON, NRB and CDS and clearing Ltd. should act immediately to clear all the ambiguity regarding the implementation of full CDS system.  Small and general investors are bound to panic on these situations but panicking will make things worse. Thus the general investors need to stay calm and hold the shares they possess.

Rajan Sharma