Nepse plunge belies investment myths

Kathmandu, December 20:

The whopping fall in indices of commercial and development banks and finance companies in

recent weeks belies the belief that financial institutions are goldmines.

This week, commercial banks lost 31.03 points, development banks lost 45.63 points, finance companies lost 22.69 points, hydropower companies lost 4.72 points and insurance companies lost 19.88 points. They also pulled down the Nepse index by 22.73 points to 720.52 points from last week’s closing of 743.25 points.

While stock markets are known for their exuberance the domestic secondary market seems in correction mode over recent months, compelling investors to be circumspect. One should consider the company, its background and promoters, financials and valuations before investing.

This week, the total transaction dropped by 20.95 per cent to tumble to Rs 352.85 million from last week’s Rs 446.37 million. Around 82 companies’ scrips were traded in the secondary market where the group-A companies contributed 56.08 per cent to the total trading from last week’s 39.87 per cent. Nepse ended in negative territory for all five days of this week.

The hype surrounding the secondary market is cooling down as the float index — calculated on the basis of real transactions — lost 2.37 points to 69.74 points from last week’s closing of 72.16 points.