Kathmandu. After the lockdown, the stock market has been trading regularly for only four days. According to the decision of the Nepal Stock Exchange (NEPSE), when the market was trading for 4 hours daily, there should have been 16 hours of trading during this period.
But in a period of 4 days, hardly only one third of the period has been traded. During the four-day period, only 5 hours and 46 minutes were traded. Due to insufficient time, only 4 million 9 thousand shares worth Rs 1.59 billion were traded during the period.
The selling pressure in the market has increased since the market opened on Monday. Due to the same reason, the Nepse index dropped by 48 points in the first 40 minutes and was postponed for 20 minutes due to a negative circuit.
According to the new circuit broker system, if the market rises by 4 percent within the first hour of trading, the first circuit breaker will be installed. When a circuit breaker is installed for the first time, trading is suspended for 20 minutes.
Similarly, trading is suspended for 40 minutes when the market is down by 5 percent and for the whole day when the market is down by 6 percent. According to the same system, trading in Nepse was postponed for 20 minutes.
But after the first circuit breaker, the market took over that day. The decline was close to zero as the market rose after the start of trading. But in the last hour, the stock market started falling again and the market stopped falling by about 12 points. In this regard, the market could be traded for 3 hours and 40 minutes on Monday.
The situation was very different on Tuesday, Wednesday and Thursday.
In the first 48 minutes of the open market on Tuesday, the index rose 4 percent to the first circuit. About 9 minutes after the start of trading, the market index reached 5 percent and stopped trading for 40 minutes. After 40 minutes, the opening business lasted only about 7 minutes. Trading was suspended for the day after the market rose another 1 percent during the period. Thus, only 1 hour and 4 minutes of trading was done on Tuesday.
In the first 13 minutes of the market opening on Wednesday, the market saw a 4 percent first circuit. After that, the second circuit was closed in the first 2 minutes in the open market and then the third circuit was broken in the open market in 7 minutes. Thus, it took only about 22 minutes for the Nepse index to rise on Wednesday.
On Thursday, Nepse turned in a negative direction. The first negative circuit breaker occurred in the first 23 minutes of that day. The market was closed for the second time within 4 minutes of the market opening and the third circuit breaker within 13 minutes of the market opening again. In that sense, it is possible to trade only 40 minutes that day.
Why market fluctuations?
For the first time in Monday's trading, a decline of around 48 points was considered normal. Analysts had speculated that this was due to the fact that investors did not have a hangover from the Corona epidemic.
The rising market after the first circuit breaker was interpreted as a bounce back of a continuous decline. The market index, which was at 1251 points before the lockdown, had dropped by about 50 points in the two-day open market. It was analyzed that investors started buying more after the market fell by 50 points again on Monday.
On Monday, news came in the market that the economy was in a positive state. Finance Minister Dr. Yuvaraj Khatiwada himself had sent a positive message saying that the process of returning from abroad has been stopped and remittances, foreign trade and revenue have also started increasing. Analysts had speculated that his message might have made the market positive on Monday and Tuesday.
But the talk of a coup began on Tuesday. The meeting of the Standing Committee of the Communist Party of Nepal criticized the government and the resignation of Prime Minister KP Sharma Oli. The same sequence did not stop on Wednesday.
But analysts are skeptical of Thursday's trading. He said that the business which was closed for two consecutive days due to positive circuit, could not be seen as a correction of the previous day's high growth due to the sudden negative circuit on Thursday. Analysts also suspect that big traders may have created unnecessary demand and supply in the market.
Investors were not allowed to trade
With the market closed for only 20 minutes on the first day, investors had relatively little time to trade. But no one was willing to buy that day. Although buyers became active in the market after the circuit breaker, price bargaining seemed to be on the rise.
The first 48 minutes passed in the same way on Tuesday. But then investors fell into a wave of rapid boom in the market. They are not able to invest in a prudent manner. Even though the confidence has increased a bit from the two-day trading, it seems that the investors have backed away from the decision to buy and sell immediately as the price they want to buy has started fluctuating a lot.
Chairman of Nepal Investors Forum Chhotelal Rauniyar said that it was sad that the market could not be traded regularly. He argues that even if the circuit breaker system is fine, the confidence of the investors will be weakened due to unnecessary fluctuations in the market.
Some of the basics of market fluctuations
Now the market is out of control. Apart from the unnatural fluctuations that are taking place due to some artificial reasons, there are many reasons for the market to rise or fall.
In particular, the recent positive signs in the economy are acting as a 'silver lining'. On top of that, the fact that NRB is positive about increasing the margin of collateral for share loans, the growing infrastructure for online transactions, etc. have shown more positive signs in this regard. On top of that, rumors of a change of government that the stock market did not like are also said to be the reason for the market growth.
Currently, the banking sector is in a state of high liquidity. Banks are not even able to invest the money they have. In such a situation, they have started to make public the products related to stock loans and other consumer loans that will be in demand soon. Bankers are also preparing to further reduce interest rates on banking deposits as liquidity declines. This has a positive double effect on the stock market. Positive changes in these areas are likely to push the stock market higher.
However, the 'black cloud' has not yet been removed. Coronavirus epidemics are on the rise after the lockdown. Due to the increasing number of infected people in Kathmandu and the fear of local transmission, the market is likely to fall further in the future. On top of that, if the political crisis deepens, even the coming crisis will not be beneficial for the stock market.
On the other hand, the current positive situation in the economy may not be long-term. The fact that remittances have increased in May due to the severe lockdown of Chait and Baishakh may not mean that remittances will always increase. The excess liquidity seen now may also go down with it. Therefore, investors are not yet in a position to be confident that the market investment will be safe now.
However, there is a problem in the market's own system now. Even now, Nepse is failing to give real time updates on stocklive. Even market indicators and capitalization information are not found to be regular. Investors complain that the problems seen in Nepse's online trading system are still the same.
Due to these internal and external reasons, it is not possible to predict the pace of the market that will open tomorrow.
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