The domestic share market has experienced a significant decline of 350 points since the formation of the new government, with both the budget and the monetary policy failing to revive investor confidence.
Nepal share market is continuously going down in recent times. The Nepal Stock Exchange (NEPSE) index has dropped to 2600 level, which is lowest in past six months. Even after a new government was formed and new policies were announced, there is no excitement among investors. Actually, people expected that share market will go up after a new government was formed under leadership of Balendra Sah, who is senior leader of Rastriya Swatantra Party (RSVP). But share market could not increase.
Before the elections held on Falgun 21, RSVP had promised share market friendly policies in their manifesto. But just the next day after government was formed, market started falling. On Chait 12, which was the day before Balen government took oath, NEPSE index was at high point of 2950.16. But today, index has dropped down to 2600 level.
This means NEPSE index has lost 350 points since Balen government came to power. This is very big drop for the stock market. With NEPSE index reaching 2600 level, it is at its lowest point in six months. Earlier on Poush 9, NEPSE had closed at 2597. After that, index touched 2600 on Friday.
In last six months, NEPSE reached its highest point of 2970 on Chait 11. But after that day, market has been constantly falling down.
Budget and Monetary Policy Fail to Create Excitement
If we look at transaction trends in NEPSE, market started falling majorly after budget announcement. For a long time, investors were demanding that Capital Gains Tax should be the final tax. Although it was final tax in practice, it did not have legal recognition. Investors had put this demand to Finance Minister Dr. Swarnim Wagle.
According to demand of investors, Finance Minister Wagle made a provision in budget of next fiscal year 2083-84 that Capital Gains Tax will be the final tax. But still, share market has not increased. In budget, Wagle brought 10 policies to reform stock market, which included bringing NRNs into market and restructuring NEPSE. But this had no good effect on market.
On Jeth 13, before Finance Minister Wagle presented budget, NEPSE rose by 5 points and closed at 2782. The budget for next fiscal year was presented on Jeth 15. Many people thought NEPSE would hit positive circuit after budget, but market went the opposite way. On first trading day after budget, NEPSE fell by 26.72 points to reach 2755 level.
Since the budget was announced, NEPSE has decreased by 86 points. Looking at market trend after budget, it seems investors are in a wait and watch mode. There is no excitement in trading volume as well.
Ghanshyam Pandey, President of Nepal Shareholder Association, says that even though budget had good policies, recent arrest of some businessmen has made investors confused. That is why share market did not go up after budget. He said that arrests created fear among investors about which company might get targeted next. Since big investors are the ones who push market up, they got scared and stayed away after budget.
Monetary Policy also Fails to Help
When share market did not rise after budget, everyone was looking at monetary policy of Nepal Rastra Bank. But monetary policy did not bring any special policy for share market. This monetary policy was probably the shortest one in history. Also, it brought a rule that higher loan against shares will only be given by keeping shares of companies with good net worth and financial health as collateral.
This has not created any positive impact on share market. Governor of central bank, Dr. Bishwanath Paudel, had released monetary policy on Asar 23. Since the policy was announced, share market has traded for three days and fell on all three days. NEPSE has lost 51 points after monetary policy came out.
The day before monetary policy was announced, NEPSE rose to 2651, but then it continuously dropped to 2600 on Friday. Chiranjibi Nepal, former Governor of Nepal Rastra Bank, says that market did not rise because monetary policy restricted loans based on company condition. He mentioned that since 70 percent of share market consists of banks and financial institutions, central bank policies have a huge impact. Investors have bought shares of both good and bad companies, and now they cannot get loan by keeping bad shares as collateral, so market fell.
Kamal Dhital, CEO of Pahi Investment Private Limited (Broker Number 76), says that investors were waiting for monetary policy but nothing special came for stock market, so market went down. Now, investors are waiting for decisions from Securities Board of Nepal.
Before monetary policy, NEPSE fell only by 21 points despite ups and downs. But in just three days after monetary policy, it crashed by 51 points. However, Ghanshyam Pandey says we cannot blame only monetary policy because it did not bring anything bad for market either. He believes market faced pressure because investors started doing stop-loss as index reached near 2600.
Since it is end of Asar, investors also have pressure to close their accounts. Brokers are also asking to sell for settlement and not giving limits, which is why market is falling. In the end, share market also runs on a lot of rumors, which has caused current situation.
AI Disclaimer: This article was originally published on https://bajarkochirfar.com. It has been translated with the help of AI. For the best understanding and accurate facts, we recommend reading the original Nepali version.
