Where Will NEPSE Bottom Out?

NEPSE recently rose from the low of 1849.19 and reached a high of 2277.61 between the 19th of December 2022 to the 10th of January 2023. Also, the mass sentiment was very positive. The mass sentiment was so positive that everyone thought NEPSE has bottomed out. But has NEPSE bottomed out yet?

It is difficult to predict with certainty when and where the NEPSE will make a bottom. NEPSE is influenced by various factors such as economic indicators, geopolitical events, investor sentiment, and company performance, among others.

I was extremely skeptical about the rise from 1849.19 to 2277.61. In this article, I have embedded my previous tweets to show how I held to my bearish stance.

The problem with permabulls is that three green days will make them see all-time highs.

I am not a permabear but the problem with permabears is when the market drops, they see a zero.

Try to stay in between, like me ????, neither too optimistic nor too pessimistic. ????

— Suraj Marahatta (.sol) (@SurajMarahatta) January 1, 2023

However, historically, NEPSE always makes bottom during times of extreme fear and panic among investors. NEPSE bottoms out when there is a significant economic downturn, geopolitical uncertainty, or unexpected events that disrupt the market.

In such situations, NEPSE experiences a sharp decline before eventually reaching a bottom. It is known as a bear market. The bottom is typically characterized by a period of consolidation and a gradual increase in stock prices as investors become more confident.

Every rise is a selling opportunity in a bear market. I've been saying this time and again, I don't believe in averaging out the losses.

Instead, I believe in buying at a reasonable price. So, I am waiting for a better buying opportunity. A better buying opportunity is near.

— Suraj Marahatta (.sol) (@SurajMarahatta) January 1, 2023

But trying to time the market or predict when it will make a bottom is a risky strategy. It is difficult and next to impossible to accurately predict market movements. For long-term investors, a more prudent approach is to focus on investing in a diversified portfolio of high-quality companies with solid fundamentals and strong growth potential.

Also, the investors must remain disciplined and patient through market cycles.

Here are the reasons why I don't think the current rise is a start of a new bull market.

1. The speed of the index growth is not proportional to the growth of the giant sectors like banking and insurance. Only a handful of stocks with a huge market cap have influenced the market

— Suraj Marahatta (.sol) (@SurajMarahatta) January 2, 2023

History of Bottoming Out in NEPSE

Historically, the NEPSE index bottoms out during times of economic and political uncertainty. For example, during the global financial crisis of 2008-2009, the NEPSE experienced a significant decline before reaching a bottom. The bear market from 2008-2009 ended in April 2012.

Similarly, during the COVID-19 pandemic in 2020, the NEPSE index also experienced a sharp decline before starting to recover. The mass sentiment was extremely bearish during the lockdowns when NEPSE was closed for months as there was no TMS system. People thought the NEPSE index will further make lower lows. But thankfully, that did not happen.

Now, people will get an excuse to say "the market is coming down because there is the NEWS of the government of Prachanda ending" while I have been saying the market will come back down for days with logic.

The market needs an excuse but follows the path it's supposed to follow.

— Suraj Marahatta (.sol) (@SurajMarahatta) January 7, 2023

The NEPSE is influenced by factors specific to Nepal, such as changes in government policies, monetary policies, social unrest, and natural disasters. For example, in 2015, the NEPSE experienced a sharp decline following the earthquake that struck Nepal. But this panic was short-lived.

After the earthquake, the NEPSE index made an all-time high of 1888.36 in 2016. However, after 2016, NEPSE experienced a three-year-long bear market which ended on the 25th of November 2019.

Distribution in NEPSE most likely began on the 1st of January 2023. Since distribution cannot complete in a single day, the market is still making higher highs to test different supply levels. This doesn't mean the new bull market has begun.

Strong the rise, stronger the fall.

— Suraj Marahatta (.sol) (@SurajMarahatta) January 8, 2023

Market Today

During the recent market rise, I was very skeptical about the market. You can read my tweets from that period as they are embedded in this article. As the index rose up, I made a consistent effort to let people (permanent bulls) know that it was a bull trap.

Some people on Twitter took my suggestion with a grain of salt, as they should. They confirmed the possibility but they traded the market and got out with a profit. While some people got emotional as they read my bearish stance on NEPSE. Some people even scolded me for my bearish opinions on the market.

#NEPSE is at 2211.76 and it feels like we're living in bull euphoria of 3227.11

We have seen the nature of bull trap time and again. On 18th Jan 2022, people were "sure" that it is a new bull if MCC is passed.

Now, people are "sure" if the government gets a vote of confidence.

— Suraj Marahatta (.sol) (@SurajMarahatta) January 10, 2023

But on the day of positive news, when the Prime Minister of Nepal got a vote of confidence, we saw a massive sell-off in the market. This has happened time and again. We experienced the same sell-off when the MCC bill was passed by the Nepalese parliament.

On the day of a market peak, the 10th of January 2023, I tweeted out to permanent bulls to keep buying in a sarcastic tone. This is because the market has not yet bottomed out.

ल अब चुरिफुरी सक्कियो है त!

People buying today on #NEPSE are very important and historic because they will be my major liquidity provider at the bottom.

Don't hit that stop less sell cause the bottom is exactly where you should sell and the top is exactly where you should buy.

— Suraj Marahatta (.sol) (@SurajMarahatta) January 10, 2023

The market bottoms out during an extreme panic. When the market goes up back to back without correction, it’s a sign of a bull trap. Had the market taken healthy corrections in the recent rise, I would have been comfortable with saying that the market has bottomed out.

But the market went up back to back without correction. It was a clear indication of a bull trap. Yes, I missed a trading opportunity but the risk was not worth the reward for me. I am okay with missing out on a rally.

#NEPSE bull market has not started yet but it is closer than farther. The bear market rallies have made one thing clear, you won't get enough corrections, hence not enough time to manage your funds.

Utilize the time from today to make a strategy cause it is a war to make money.

— Suraj Marahatta (.sol) (@SurajMarahatta) January 11, 2023

This is the right time to invest in the market. We should accumulate more shares as the market goes down to make a bottom.

I will soon write about how the NEPSE bull begins in the coming blog posts. Comment below if you have any questions or queries about my article and about my views on the market.