KATHMANDU, OCTOBER 15
The existing liquidity crunch in the country's financial system has decelerated the growth of the capital market. With hiked interest rates for loans and various difficulties faced by investors in even getting a loan in the first place, it may take a few months before the market starts to follow an upward trend, experts say.
The Nepal Stock Exchange (Nepse) index edged up by 16.87 points or 0.91 per cent in between October 9 and 13.
Kumar Keshar Bista, a financial analyst and adviser, said that the problem of liquidity in the country has not been fixed, leading the banks to increase their interest rates.
"The banks just don't have the money to disperse loans. In my experience, banks used to give out loans at a base rate, which was below eight per cent, about two years ago. A year later, a premium of .25 per cent was added to the loans.
Recently, a premium of six per cent was added to loans taken by some investors. The continuous hike in interest rates indicates that the banks want investors to pay their margin loans as quickly as possible. Without some progress in the condition of the country's liquidity crunch, the share market will not see much growth," he said.
According to him, the repayment of loans and improvement in inflow of remittance by a wide margin could help ease the liquidity situation. "With a huge number of people leaving for foreign employment in recent days, cash flow may increase inside the country and we may witness some significant growth of the capital market by mid-February," Bista said. "Although the addition of brokers and introduction of a second stock exchange market will have a positive impact on the sector, it will take some time. While brokers might take six to eight months to come into function, the second stock market will take about a year at earliest," he said.
The sensitive index, which measures performance of class 'A' stocks, increased by 1.02 per cent or 3.72 points to 367.14 points in the review period. The float index that gauges performances of shares actually traded also went up by 1.06 per cent to 130.73 points.
Altogether 12.22 million shares were traded during the review week through 76,392 transactions that amounted to Rs 3.88 billion.
The weekly turnover increased by 36 per cent compared to the previous trading week before the Dashain holidays, when 9.28 million shares had changed hands through 65,731 transactions that totalled Rs 2.85 billion.
The average daily turnover in the previous trading week, when the market had remained open for just four days, was over Rs 713 million.
The average turnover in the review week, when the market had remained open for the normal five days went up to Rs 776.47 million.
The benchmark index had opened at 1,853.76 points on Sunday and rose by 44.62 points to at 1,898.38 points by the time of closing for the day. The market lost 27.16 points on Monday to close at 1,871.22 points before falling again the next day by 16.06 points to 1,855.16 points. On Wednesday, the benchmark index gained 11.32 points to 1,866.48 points before advancing to 1,870.63 points on Thursday.
Apart from trading, all the remaining subgroups landed in the green during the week. The trading subgroup fell by 0.26 per cent to 1,787.07 points.
Meanwhile, the banking subgroup advanced by 0.46 per cent to 1,308.30 points. Similarly, manufacturing and processing gained 3.32 per cent to 4,859.22 points, hotel and tourism rose by 1.31 per cent to 2,568.42 points, others went up by 0.76 per cent to 1,313.55 points.
Similarly, hydropower advanced by 0.53 per cent to 1,978.17 points, non-life insurance by 0.50 per cent to 7,538.54 points, finance by 4.96 per cent to 1,583.34 points.
Development banks rose by 3.55 per cent to 3,426.86 points, microfinance by 1.03 per cent to 4,234.95 points, life insurance went up by 0.65 per cent to 8,771.22 points, mutual funds by 0.22 per cent to 13.56 points and investment by 0.25 per cent to 56.92 points.
A version of this article appears in the print on October 16, 2022 of The Himalayan Times.
