KATHMANDU, JUNE 30
Investor sentiment got a major boost today on the reports of the market regulator and other government authorities hinting at revision of provisions that would be favourable for the secondary market.
The Nepal Stock Exchange (Nepse) index advanced by 74.93 points to close at 2,037.64 points today, with 7.25 million shares of 227 companies changing hands that amounted to Rs 2.45 billion.
According to share market analysts, the investor sentiment has improved in the recent days as the market regulator and other government authorities have initiated discussions with investors for improvement of the secondary market.
"The officials of Ministry of Finance, Nepal Rastra Bank and Securities Board of Nepal have been holding dialogues with registered investors' associations, such as Nepal Investors Forum (NIF), Share Investor Association Nepal, among others," informed Chhote Lal Rauniyar, the immediate past president of NIF, adding the outcome of the meetings has been positive.
According to him, Finance Minister Janardan Sharma and the NRB Governor Maha Prasad Adhikari also had a meeting to discuss problems seen in the capital market and a committee has been formed by SEBON to look into the issues raised by agitating investors. "All these developments have had a positive impact on the market movement."
Moreover, rumour has it that the central bank governor is under pressure to review and introduce secondary market-friendly policies through the upcoming Monetary Policy."
Rauniyar further said that there is a trend of the secondary market usually moving up towards the end of each fiscal year, so that could be another reason for the benchmark index being northbound of late.
The sensitive index, which measures the performance of class 'A' stocks rose by 3.82 per cent or 4.71 points to close at 127.80 points today.
The float index that gauges the performance of shares actually traded went up by 3.86 per cent, or 5.22 points, to 140.46 points.
With a surge of 94.92 points, the Nepse index had crossed the threshold of 1,900 points on Sunday.
While the optimism could not sustain and the benchmark index retreated by 23.85 points and 11.82 points on Monday and Tuesday, the market bounced back with a gain of 41.39 points to 1,962.71 points on Wednesday.
After reaching an all-time high of 3,198.60 points on August 18, 2021, the stock market has been largely volatile, with market analysts blaming the central bank's monetary policy of the current fiscal year for weighing on the investor sentiment.
The monetary policy of 2021-22 capped the limit of margin loan whereby a person is able to take a loan of only up to Rs 40 million by using shares as collateral from one BFI, with total margin loan from multiple BFIs per person limited to Rs 120 million. According to Rauniyar, the rule of capping the limit of the margin loan prompted investors to sell their shares to abide by the new rules.
Moreover, he blamed the NRB for implementing the rule of credit-deposit (CD) ratio through monetary policy by replacing the provision of credit to core-capital plus deposit (CCD) ratio which also impacted the market and caused the liquidity crunch in the banking sector.
"Due to the CD ratio policy, Rs 500 billion amount has been frozen in the banks," he said. "Also, the amended Unified Directive for BFIs also stated that lending against shares shall attract a risk weight of 150 per cent, which dampened the spirits of the investors."
According to him, the share market could reverse course if the monetary policy for the next fiscal year addresses these issues.
A version of this article appears in the print on July 1, 2022, of The Himalayan Times.
