Rupee depreciation negatively impacts stock market

By Hiran H.Senewiratne

Trading activities at the CSE were positive initially yesterday but during the latter part of the day their momentum flagged due to a significant amount of net foreign outflow. The reason being Sri Lanka’s economic uncertainty owing to foreign reserves falling to a dangerous level and the depreciation of the rupee as against the dollar, stock market analysts said.

So far a Rs. 38.81 billion foreign outflow has been reported but higher local investor participation was noted during the last few weeks. The downgrading of the S and P SL20 index was also one of the reasons for reporting a heavy foreign outflow, consequent to economic uncertainty, stock market brokers said.

Vallibel One and tile sector counters noted fresh buying interest yesterday. But most sought after counters, such as the Hayleys and Expolanka, noted some profit takings but it did not continue for a longer period of the day, stock analysts said.

The low interest regime and the rupee depreciation have attracted local investors, especially for import oriented counters. Amid those developments, both indices moved upwards. The All Share Price Index went up by 176.22 points and S and P SL20 rose by 73.02 points. Turnover stood at Rs. 12 billion with four crossings. Those crossings were reported in HNB, which crossed 5.7 million shares to the tune of Rs. 773 million, its shares traded at Rs. 135, Hayleys 314,000 shares crossed for Rs. 38.3 million, its shares traded at Rs. 122, Windforce 1.2 million shares crossed for Rs 21.9 million, its shares fetched Rs. 18.30 and Commercial Bank 250,000 shares crossed for Rs. 21.3 million, its share price being Rs. 85.50.

In the retail market, five companies that mainly contributed to the turnover were, Expolanka Holdings Rs. 2.43 billion (13.1 million shares traded), Browns Investments Rs. 2.42 billion (200 million shares traded), Vallibel One Rs. 776.2 million (11.2 million shares traded), Royal Ceramic Rs. 751 million (15.2 million shares traded) and LOLC Rs. 595 million (949,000 shares traded). During the day 462.5 million share volumes changed hands in 60000 share transactions.

It is said that the CSE’s recent stellar performances, despite COVID-19-induced setbacks and challenges to the economy and society, have dumbfounded critics and even surprised the more optimistic within the government. However, analysts opined that resilient private sector performances as evidenced by impressive corporate earnings as well as improved outlooks, the subdued interest rate regime and attractive valuations, were key factors for the sustained upturn in the Colombo bourse.