Kathmandu, July 18

Total value of shares listed on Nepal Stock Exchange (Nepse) has surged to almost Rs two trillion, as the stock index jumped by 40.83 points on the back of strong demand for shares of commercial banks and insurance companies.

Market capitalisation of Nepse hit Rs 1.965 trillion today, as the stock index, which opened at 1,745.74 points, climbed 2.34 per cent to close at an all-time high of 1,786.57 points.

Today’s market rally was led by banking and insurance stocks, with banking sub-index recording a growth of 2.51 per cent to 1,664.47 points and insurance sub-index witnessing a jump of 7.13 per cent to 9,292.64 points.

“Investors have once again started showing interest in banking stocks as shares of microfinance institutions have lost charm. Also, share prices of insurance companies rose after losing value in the initial hours of trading, as those who sold shares of microfinance institutions went behind insurance stocks,” Stockbroker Anjan Poudel told The Himalayan Times.

Investors started dumping shares of microfinance institutions right after the central bank fixed interest spread of seven per cent for the sector on Thursday. This means funds borrowed by microfinance institutions at, say, five per cent interest, cannot be extended to their borrowers at interest rate of over 12 per cent. This provision is expected to bring down lending rates of microfinance institutions, thereby reducing their earnings.

As a result, nine companies in the top 10 list of biggest losers today were microfinance institutions.

Until now, share prices of microfinance institutions were surging on expectations that the central bank would raise minimum paid-up capital requirement for these institutions. “Instead, the banking sector regulator fixed interest spread, which has dampened the confidence of those investing in the microfinance sector,” Poudel said.

Although falling share prices of microfinance institutions initially raised market volatility today, demand for other stocks gradually went up, paving way for the index to rise.

“Earlier, investors used to panic once the index moved downhill. This used to heighten problems. But lately investors have started buying shares even when selling pressure is building, which tends to cover up losses,” said Poudel.

One of the reasons for this is the flexibility offered by fully automated share trading, securities ownership transfer and clearance services, which has enabled investors to rapidly divert funds from one sector to the other.

With the commencement of these services, Nepse has fully enforced the provision on T+3, under which all payments have to be settled within three days of share trading.

“Because of these facilities, investors who could revolve the capital two to three times a month can do so in a week. This has increased velocity of money, which is one of the reasons why the stock market is seeing big jump in trading volume,” Poudel said.

Today, the trading volume at Nepse stood at Rs 1.95 billion. Shares of this value were traded through 9,095 transactions — the highest so far in Nepse’s history. Previous record, in terms of number of transactions, stood at around 7,500.

The number of transactions surged to a new high today because of extension of trading hours from three to four hours, according to Nepse officials.