KATHMANDU, AUGUST 27

Weak investor sentiment caused the Nepal Stock Exchange (Nepse) index to lose 45.64 points or 2.21 per cent during the trading week of August 21 to 26.

"The persistent liquidity crunch, rising interest rates, conflicting media reports and political uncertainties have discouraged investors," said Chhote Lal Rauniyar, former president of Nepal Investors Forum, explaining the recent market movement. According to him, the secondary market is inversely proportional to the interest rates, meaning the benchmark index falls when the rates go up and vice versa.

According to him, mass psychology plays a crucial role in the share market. The market was very strong and confident during the corresponding month last year, with the benchmark index surging to an all-time high and witnessing a daily turnover of over Rs 20 billion.

"However, the comments made by authority bodies regarding the market and their inability to spread a positive message to boost the sector have affected the confidence of investors. The interest rates for margin loans going up has also discouraged investors. The total amount of loan taken by investors which stood at around Rs 123 billion in the past has plunged to less than Rs 60 billion at the moment," Rauniyar informed.

He also said that the authorities concerned with the market have created a sense of mistrust among the investors by making demotivating comments, introducing new rules and regulations affecting the investors, and having an orthodox mentality. Questions are being raised on the principles of regulatory bodies due to such reasons which are affecting the growth of the share market.

"In general, about 18 per cent of the country's population are involved in the share market. As many as 5.3 million people have a demat account, 4.3 million have a meroshare account, 2.7 million are applying for initial public offerings (IPOs). The share market has taken a bigger shape than the country's budget. However, instead of creating a conducive environment for the market, the orthodox mentality of the regulators has negatively affected the market and saddened investors," he said.

Rauniyar also said that now is the right time to invest in the share market. He said that the secondary market has slumped from 3,200 points to around 2,000 points in a year and that there is a low chance for the market of falling much further.

Quoting Warren Buffet, Rauniyar said, "Always invest in the red zone so that you can enjoy the green zone. Those who don't have to take any kind of loans to invest in the market should do so. There is a high chance to double or even triple your investment through creative compounding over the next two to three years."

The sensitive index, which measures the performance of class 'A' stocks, fell by 2.08 per cent or 8.34 points to 391.74 points in the review period. Similarly, the float index that gauges the performance of shares actually traded also decreased by 1.95 per cent to 139.58 points.

Altogether 25.93 million shares were traded during the trading week through 196,028 transactions that amounted to Rs 9.62 billion. The average daily turnover also fell to Rs 1.60 billion compared to last week when the average turnover stood at Rs 2.10 billion.

The benchmark index had opened at 2,068.26 points on Sunday and decreased by 7.71 points to close at 2,060.55 points for the day. The market fell by 7.42 points on Monday to close at 2,053.13 points before gaining 1.85 points to 2,054.98 points on Tuesday. On Wednesday, the Nepse index inched up 2.86 points to 2,057.84 points but fell by 18.30 points to 2,039.54 points on Thursday. The market lost 16.92 points on Friday to settle at 2,022.62 points for the week.

Indices of all the 13 subgroups landed in the red this week, with finance subgroup witnessing the biggest plunge of 5.85 per cent or 107.81 points. It was followed by trading that slumped 5.30 per cent or 113.03 points, others by 5.29 per cent or 82.53 points, development banks by 4.48 per cent or 170.79 points, hydropower by 4.53 per cent or 113.23 points.

Similarly, the manufacturing and processing sub-index fell by 2.43 per cent or 124.15 points, hotels and tourism by 2.41 per cent or 67.06 points, microfinance by 1.99 per cent or 93.56 points, investment by 2.87 per cent or 1.95 points, non-life insurance by 1.67 per cent or 137.74 points.

Meanwhile, banking sub-index decreased by 0.53 per cent or 7.19 points, mutual funds by 1.84 per cent or 0.27 points, and life insurance by 0.09 per cent or 8.05 points during the review week.

A version of this article appears in the print on August 28, 2022 of The Himalayan Times.