Stock market takes correction route

Wednesday, 6 October 2010 00:29 - - {{hitsCtrl.values.hits}}

The Colombo stock market continued to correct itself for the second consecutive day after having soared by over 100% year to date.

“The indices dipped further due to profit taking across the board amid healthy turnover levels,” John Keells Stock Brokers said.

The ASPI was down by 98.63 points and MPI by 107 points whilst turnover was Rs. 3.95 billion. Yesterday’s 1.4% dip brought the total decline to 2.2% since Monday.

Best performing sector was Investment Trusts (+1.32%) and worst performing was Footwear and Textiles (-3.48%).

“Prices declined broadly continuing the downward trend from yesterday. A short term correction was expected as the indices gained rapidly over the last few weeks,” NDB Stockbrokers said.

Banks Finance & Insurance and Diversified sectors were the highest contributors to the market turnover while sector indices declined 1.82% and 2.40% respectively.

Monday star, Hatton National Bank was the highest contributor (Rs. 542 million) to the market turnover yesterday as well with five crossings amounting to 1,095,100 shares at Rs 400. However the price decreased by Rs 7.30 (1.76%) and closed at Rs 407.

Nawaloka Hospitals also contributed significantly to the market turnover (Rs. 410 million) with a price appreciation of Rs 0.10 (1.09%) and closed at Rs 9.30.

Three major crossings were recorded for 122,700 shares of John Keells Holdings at Rs 345, 500,000 shares of Hayleys at Rs 350 and 300,000 shares of Ceylinco Insurance at Rs 440.

Reuters reported that market fell due to a long overdue market correction as investors cashed in profits after the bourse rose over 21 percent in September.

The index had risen 26.3 percent since Sept. 1 through Friday.

Analysts said the market was driven down by blue chips led by market heavyweight John Keells Holdings and top private lender Commercial Bank of Ceylon, both of which fell by more than 4 percent.

The recent surge has pushed the index into its overbought zone with the 14-day relative strength index (RSI) at 79.3, over the upper neutral limit of 70, Thomson Reuters data showed. It is trading at the highest forward price-to-earnings ratio in Asia and global emerging markets at 22.3 times, compared with 13.1 for all Asia and 12.1 for global emerging markets, Thomson Reuters StarMine data showed.

Meanwhile the rupee rose to 111.70/72 to a new 21-month high from Monday’s close of 111.82/111.85, on exporter dollar sales.