During the review period of March 24 to April 18, the Nepal Stock Exchange (NEPSE) soared by 91.66 points (+8.04 %%) to close at 1232.26 points. Anticipation of strong third quarter result of commercial banks boosted the market, as most commercial banks were trading at historically low and attractive Price Earning (PE) ratios. Further, relaxation in PAN number requirement for transactions below Rs 5 lakhs in the secondary market boosted the confidence of small investors. The surge was equally supported by strong market volume, the total turnover during the period surged by 108% and stood at Rs 8.54 billion.
During the review period, eight of the sub-indices landed in the green zone whereas two landed in the red zone. Out of the indices from the green zone, Commercial Bank sub-index (+13.86%) led the pack of gainers with increase in share value of Nabil Bank (+Rs.100), NIC Asia Bank (+Rs.87) and Everest Bank (+Rs.79). Similarly, Microfinance sub-index (+6.10%) followed with a jump in share value of Chhimek Laghubitta (+Rs.134), Sana Kisan Bikas Bank (+Rs.127) and Deprosc Laghubitta (+Rs.93). Development Bank sub-index (+4.05%) was third in line with increase in share value of MuktinathBikas Bank (+Rs.42) and Bhargav Bikas Bank (+Rs.29). Likewise, Life Insurance (+3.88%) went up with increase in share value of Life Insurance Co. Nepal (+Rs.80) and Nepal Life Insurance Company (+Rs.37), which was followed by Hotels sub-index (+3.24%). Top gainers in this sub-index were Oriental Hotel (+Rs.24) and Soaltee Hotel (+Rs.8). Similarly, Non-life Insurance sub-index (+1.70%) witnessed increase in share value of Everest Insurance (+Rs.150) and United Insurance (+Rs.78). Further, Finance sub-index (+0.82%) went up with increase in share value of Janaki Finance (+Rs.8) and Pokhara Finance (+Rs.6). Others sub-index (+0.06%) gained marginally as share value of Nepal Doorsanchar Company(+Rs.5) and Hydroelectricity Invest and Development (+Rs.5) went up. On the losing side, Hydropower sub-index (-2.07%) went down with decrease in share value of Upper Tamakoshi Hydropower (-Rs.11) and Arun Kabeli PoweR (-Rs.10).
New and Highlights
The Securities Board of Nepal (SEBON) mandatorily implemented Permanent Accounting Number (PAN) on April 15 on share transaction of more than Rs 5 lakhs in the secondary market, while making it optional for small investors. Similarly, SEBON has also made it mandatory to allow investors to purchase Initial Public Offering (IPO) shares starting Rs. 1000 only (i.e. 10 units). This has been done to increase participation of investors including students, housewives and small investors from rural areas. Additionally, to gain the interest of investors and retain them, SEBON has also directed NEPSE to develop the best suited system to amend the current mechanism of the online trading system. Moreover, SEBON has been successful in badging the title of the first Nepali institution to receive membership of OECD INFE (International Network of Financial Education) that can aid in spreading financial awareness to the mass.
NEPSE has developed and endorsed amendment in the current circuit break system. Also, companies with low credit rating scores (grade 5 rating companies) are banned from issuing IPOs. Issuing premium FPOs at a rate above the net worth of the respective company is also not allowed.
On the public issue front, Sanjen Jalavidhyut Company Limited and Rasuwagadhi Hydropower Company Limited issued IPO worth Rs 547.5 million and Rs 1.02 billion respectively. Both Sanjen Hydropower and Rasuwagadhi Hydropower were assigned Grade 4+ rating by ICRA Nepal Limited indicating below-average fundamentals.
Outlook
Listed companies have started to roll out their third quarter financials of the fiscal year, and early forecasts indicates strong annual earnings. Investors’ confidence is likely to remain strong in the days ahead aided by favorable reforms put in by the concerned authorities and ease in market interest rates.
This is an analysis from beed management pvt. ltd. No expressed or implied warrant is made for usefulness or completeness of this information and no liability will be accepted for consequences of actions taken on the basis of this analysis.
