Nepal Stock Exchange (Nepse) created another fresh record today, as the benchmark index advanced 20.46 points to rest at an all-time high of 1544.53 points.
With this, Nepse has breached its own record for the fifth consecutive trading day.
Nepse has been setting new records since Wednesday, as lack of investment opportunities in aftermath of quakes and supply disruptions have prompted investors to bet on stocks.
As a result, trading volume has stood at over Rs one billion since the beginning of this week. Today, the turnover jumped to an all-time high of Rs 1.65 billion, while market capitalisation — value of all listed shares — stood at Rs 1,666.04 billion.
“The confidence of stock investors is high these days because they are upbeat about future economic prospects, as supply situation has normalised and post-quake reconstruction works have begun. This sentiment has helped the market to grow,” said Deepesh Vaidya, managing director of Kriti Capital and Investments. The buoyancy seen among stock investors has been matched by leniency shown by banks in extension of loans against stocks.
Margin lending of commercial banks jumped 64.76 per cent till the end of the third quarter of this fiscal to Rs 21.30 billion, show unaudited balance sheets of all 29 commercial banks. In the same period a year ago, banks issued Rs 12.93 billion in credit against stocks. These loans have played a supporting role in pushing the market forward.
“As the stock market is advancing, new investors have also started to join the trading, as there is this sentiment that the market will continue to go up for some time,” said Vaidya.
Many investors assume the market rally to continue for some time because Nepal Rastra Bank has directed banks and financial institutions (BFIs) to raise minimum paid-up capital by up to four fold.
Since the deadline for meeting the capital requirement is mid-July 2017, many expect the market to move uphill till that time because BFIs will continue to issue bonus and rights shares in the coming days to raise their capital stock. And since BFIs account for 83.9 per cent of the share market, rise in prices of banking stocks will automatically lift the market.
“But investors should be careful because BFIs that fail to raise their assets (lending) in line with hike in paid-up capital, may not be able to generate profit,” said Vaidya.
A version of this article appears in print on May 25, 2016 of The Himalayan Times.