BIRTH OF THE BULL Why benchmark index will reach 609-mark

ShareSansar, October 10:

Nepal Stock Exchange Limited (NEPSE), the only stock market of the country, has finally breached the resistance of 556 after a hiatus of 45 months, heralding a bullish trend.

The benchmark index, which went on a freefall after the highest point of 1175.38 on March 31, 2008, had closed at 562.11 points back in November 22, 2009. Ever since then the share market was on a bearish trend.

It plummeted to the lowest of 292.32 on June 6, 2011 shortly after the dissolution of the historic Constituent Assembly, triggering unprecedented political void in the country.

The fiscal year 2012/13 augured well for the secondary market of Nepal.

Though the market entered the year in a battered condition, with political gloom hanging over the country, several factors such as margin lending, mutual fund, Central Depository System (CDS), handsome dividend offered by the listed companies and other factors salvaged the performance of the local bourse.

The market closed at 518.27 by the end of the last fiscal year, gaining 121.3 points, or 31.13 percent, over the previous fiscal closing.

It may be noted here that the resistance of 556 was a tough one. The benchmark index had tried to overcome it around half a dozen times since February.

The major factors that surged the market this time around include surplus liquidity in the banking system due to timely budget and surging remittance due devaluation of the local currency against greenback.

Lower interest rates of BFIs and the lack of investment opportunities, which made BFIs as well as individual investors to turn to the stock market for effective management of their portfolio.

Resumption of marginal lending, and announcement of the fresh CA election, which has given rise to hope of political stability, further fueled the stock market.

What next?

Improvement in the benchmark index as well as the volume of trades over the past few months as well as overwhelming response in the primary market also show upbeat market sentiment toward the capital market, which hint at its further growth.

The fact that the NEPSE has breached 556 hurdles itself is very much likely to push the benchmark index further – a psychological factor.

Handsome dividends being offered by the BFIs and insurance companies will also propel the market.

The much-awaited positive results of the first quarter, which is due to be published soon, will also give further boost to the market.

Similarly anticipation that the central bank will ask the BFIs to further soar up their paid-up will definitely have a positive impact on the bourse. Insurance Board is also expected to issue similar directive to insurance companies.

Yet another factor that will impel the stock market is the four mutual funds in the pipeline. Siddhartha Capital Limited, Laxmi Capital Limited, NIBL Capital Limited and NMB Capital Limited are expected to float their investment schemes shortly after the festive season.

So far there are only two mutual funds in the capital market.

Further, CDS and clearing system, which has overcome the row with the share brokers and is about to operate full-fledged within a few months, is like an icing on the cake for the stock market.

Technically too, the stock market is heading toward a bullish trend.

Current breach of 556 level suggest the market is heading 609 level, according to a technical analysis conducted by ShareSansar.com. Click here for more detail..