Since July 27, 2016 (the day NEPSE notched the all-time high of 1,888.36), the index has been experiencing downward primary trend. Even after almost two years, the primary trend is still south-bound and there is no immediate sign of northern winds. But in this time, the investors/traders had a few good respites. Till March 27, 2018, Mr. Market presented us with at least four upward swings of secondary trend. Mr. Market consists of optimists and pessimists. Whenever optimists overwhelm the pessimists, the market turns green and a north-bound rally ensues. Looking back at the charts of July-October 2016, we can see that the first contingent of pessimists booked profit at 1,888 zone and they were quickly followed by early adopters.
This resulted in making more supplies available in the market than the existing demand could absorb. There was a sharp pullback to 1,675 within a short span of one month. The all-time-high seen just a month back made the majority entertain a false hope of new highs and this optimism helped Mr. Market to make a first rally, starting from 1,675 itself and ending at 1,855. The pessimists saw an opportunity to book profit. The early adopters again joined the party and their combined efforts pushed the index down to 1,725.
At 1,725, the selling started to falter and the common man became happy, thinking that the index was unable to go down even to previous level of 1,675, and that means the uptrend is still valid. The innocent laggards who missed the opportunity to get a bigger share of cake and the over-ambitious optimists felt it the right time to enter.
Again, the optimists pushed the pessimists up to 1,822. By then, the population of pessimists had quadrupled. The selling frenzy which got triggered at 1,822 resulted in continuous downswing of the index for more than four months. The minor rallies were quickly utilized as the profit booking option or a stop loss zone. The fear overcame the greed and the situation continues to prevail till date.
Three weeks back, this columnist had talked of the seasonal effect. The fundamental realities of liquidity crisis, increase in the deposit rates, three-fold growth in the supplies due to bonus and right shares, and decline in earnings per share, are totally ignored by the masses. The masses read the growth in net profits of the banking and financial institutions, the capital plan of the insurance companies and the soon-to-be-operated online transaction system, as the realities which could easily overcome the downward biases.
The hope fueled new optimism and a rally started at 1,135. As it continued, the talk of the town turned to the index reaching 2,000 and beyond. As expected, the banking and financial institutions related sub-indices could not provide much help. The rally faced a strong resistance at 1,461. From the start of May, the index started moving sideways, and it will be too early to say when the index will break the sideways movement. People feel the negative fundamentals are equally matched by the positive fundamentals and we continue to see confused state of the index !
