According to market analyst Basanta Pandey, technical indicators and upcoming policy reforms suggest that the Nepal Stock Exchange (NEPSE) is currently forming a bottom.
The NEPSE index has been under pressure for past few weeks, but technical indicators are starting to show that the market is in a bottoming stage.
RSI Reaches Rare Oversold Levels
Market analyst Basanta Pandey says that daily Relative Strength Index (RSI) for NEPSE has dropped to around 25 level. This is a very rare event in the stock market. Previously, during last year Gen-Z protest, RSI went down to around 20. After that, market made big recovery and went up to around 2950 level.
He believes similar technical setup is happening again. Currently, most of the sectors has entered oversold zone. It is not just NEPSE, but sectors like banking, hydropower, development bank, microfinance, life insurance, and manufacturing are all in oversold area.
Sideways Movement Shows Bottom Formation
Right now, market is trading sideways in range of 2640 to 2660 points. Buyers are active at lower levels, while selling pressure remains at higher levels. Mr. Pandey says this is a clear sign that market is building a bottom.
He also said that market is slowly digesting recent political and investigation news. At first, there was panic selling because of investigations on some famous businessmen and big companies, but now market is treating these events as normal things.
New Policies to Bring Liquidity
In coming days, some policy changes can give more energy to market. The government announced to establishing an Asset Management Company in budget, and giving NRNs easy access to secondary market will help. Also, margin lending through brokers will bring new liquidity.
An Asset Management Company will help banks to manage non-banking assets that are currently stuck. This will improve financial health of banks, which is good for overall stock market. Once broker margin lending starts, more investment will come into the market to help increase market turnover and liquidity in short term.
Earnings Improvement Needed for Long Term
However, he also mentioned that company profits are still weak and financial institutions are under pressure. For market to go up in long run, earnings of companies must improve.
If NEPSE can stay above 2660 points with a strong bullish candle, it will confirm bottom is formed. After that, market can start its journey towards 2900 to 3000 level. He suggested investors not to look at market only with fear, but to analyze technical signals, policy reforms, and market psychology.
This article was originally published on https://bajarkochirfar.com. Translated with the help of AI and reviewed by our editorial team.
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