Kathmandu, March 4

The Nepal Stock Exchange (Nepse) index fell by 53.62 points or 2.65 per cent in the trading week between February 26 and March 2.

The sudden shift in relations between the recently-formed coalition followed by the resignation of minister for finance Bishnu Prasad Paudel, introduction of stringent policies for microfinance institutions by the Nepal Rastra Bank (NRB), among other factors, have added further challenges rather than the much anticipated support to the market's growth, stakeholders say.

According to Chhote Lal Rauniyar, the immediate past president of Nepal Investors Forum (NIF), although investors had hoped for the market to take a steady growth pace following the assurance given by former finance minister Paudel and the NRB for the market's development after the formation of a new government, the shift in political relations due to the upcoming presidential election has rather dampened investors' sentiment towards the market.

'Even though the NRB and the former finance minister were very positive towards the market in the initial phase, the demands of the stakeholders were not addressed in the half-yearly Monetary Policy review despite numerous assurances and commitments made by them. The demands set by the stakeholders related to controlling the liquidity crunch, decreasing the interest rates, removing the cap on margin lending were not addressed intentionally in anticipation of the disagreements among political parties for the presidential election,' he said.

Rauniyar also shared that the stringent policy introduced by the central bank for microfinance institutions has heavily weighed on the market, adding that the decision was made on a whim by the authorities. 'The NRB amended the 'Unified Directives Microfinance Financial Institutions, 2022' and tightened the disbursement of loans from microfinance companies and increased the amount to be deposited in the general reserve fund by 50 per cent for institutions that distribute an annual dividend of 15 per cent, among other decisions, after some institutions were found to be breaking the law. Instead of taking action against the guilty, the central bank introduced policies that can adversely affect the whole sector as well as billions of investment of the public. The market has also been largely affected due to political interventions as government authorities have shown that they can even overturn a sector's growth if they want to,' he told The Himalayan Times.

The sensitive index, which measures performance of class 'A' stocks, decreased by 2.81 per cent or 10.80 points to 373.56 points in the review period. The float index that gauges performances of shares actually traded also fell by 2.65 per cent to 138.31 points.

Altogether 22.96 million shares were traded during the review week through 171,598 transactions that amounted to Rs 8.43 billion. The weekly turnover increased by 34.39 per cent compared to the previous trading week, when 17.19 million shares had changed hands through 126,516 transactions that totalled Rs 6.27 billion.

However, as the market was open for just three days in the previous week compared to the normal five trading days in the review week, the average daily turnover in the review week slumped by 19.36 per cent to Rs 1.68 billion, compared to Rs 2.09 billion in the previous week.

The benchmark index had opened at 2,022.64 points on Sunday and it edged up by 4.55 points to 2,027.19 points by the time of closing before witnessing a southward trend throughout the trading week. The market dropped by 3.65 points to 2,023.54 points by the time of closing on Monday. On Tuesday, the market shed 3.61 points before falling further by 24.44 points to retreat below the 2,000 threshold to 1,995.49 points on Wednesday. On Thursday, the Nepse index lost another 26.47 points to settle at 1,969.02 for the trading week.

All of the sub-indices apart from hotels and tourism landed in the red this review week.

Manufacturing and processing led the pack of losers after plummeting by 4.93 per cent to 4,703.27 points; microfinance slumped by 4.30 per cent to 3,739.04 points; trading lost 3.88 per cent to 2,101.19 points; life insurance by 3.22 per cent to 9,876.35 points; and banking fell 2.80 per cent to settle at 1,297.16 points.

Similarly, finance decreased by 2.72 per cent to 1,653.47 points; others fell by 2.43 per cent to 1,428.04 points; development banks lost 2.23 per cent to 3,556.02 points; non-life insurance fell by 2.15 per cent to 8,687.83 points; hydropower declined by 1.55 per cent to 2,516.76 points; investment by 1.22 per cent to 64.05 points and mutual funds shed 0.78 per cent to 14.01 points.

Meanwhile, hotels and tourism inched up by 0.27 per cent or 8.29 points to settle at 3,100.09 in the review week.

A version of this article appears in the print on March 5, 2023, of The Himalayan Times.