Kathmandu, September 20:

Greed is more dangerous than market fundamentals. At least, for the current stock market, which is defying all the market fundamentals and is propelled by the greed of bonus shares and dividends.

Due to investors’ over confidence, the stock market has defied all odds and posted a 42.04 points or 5.02 per cent growth today, which in itself is a record in a single day trading in Nepal’s stock trading history. Market capitalisation has also reached Rs 242.474 billions, which is yet another record.

The sole secondary market, Nepal Stock Exchange (Nepse) index, opened at 837.92 points and closed at 879.96 points today. The 400 points Nepse — just 10 months ago — is it seems heading towards 1000 mark, if the current trend continues.

The sensitive index has also posted a rise of 12.79 points or 5.87 per cent to 230.56 points. Total traded amount registered was Rs 135573185.00 for today.

“Few shares and high demand is a major reason behind the growth,” says Rabindra Bhattarai, a stock analyst adding that the high expectations of investors have also propelled the stock market this week.

This week, some of the banks like Standard Chartered Bank have announced bonus shares and dividends raising investors’ expectations even higher.

However, market watchers are not convinced with the recent ‘growth’ because they suspect

inside trading, manipulation and desire for short-term gain — in the growth in the share prices — by some of the investors.

The current growth is not justified by market fundamentals like the number of shares transacted in a day in comparison to growth and Profit Earning (PE) ratio, they claim. Siddhartha Bank’s PE ratio is 48, whereas Laxmi Bank’s PE ratio is 73 and Machhapuchhre Bank’s is at 88, according to their unaudited report.

Rising share prices of banks, which even have negative net worth, leaves room for more speculations that there is a major foul-play on.

“Finance companies that provide loans to buy shares in the secondary market are yet another force behind the growth,” says Mahesh Pundit, an investor.

“Low investment opportunities have also fuelled growth in stock prices,” says Rabindra Pradhan, a stock broker. Stocks have become a major investment portfolio in recent days as other available investment opportunities like real estate and gold are not so lucrative.

“This growth should have encouraged other companies to float their shares, which is not happening,” says Pradhan adding that the sooner other companies float their shares, the better it would be for the stability of the stock market.

However, some stock pundits predict market to cool down from next week as all major banks are closing their books and buyers, who buy shares after book-close, will not get any dividends and bonus shares.

The banking sub-index — led by Standard Chartered Bank’s growth of Rs 600, Nabil Bank Ltd’s Rs 275, Nepal Investment Bank Ltd’s Rs 252 and Himalayan Bank Ltd’s Rs 205 per share today — posted a 61.40 points or 6.48 per cent growth.

The Nepse, where more financial institutions and commercial banks’ shares are transacted, has imposed the circuit breaker on the trading of shares of Nepal Investment Bank, Himalayan Bank and Siddhartha Bank as their shares posted a growth of more than 10 per cent in a day.

Today is the last day of weekly share trading as shares are traded only for five days in a week.