KATHMANDU, JUNE 4
The secondary market declined significantly this week, disproving the analysis of some that the stock market would rise after the announcement of the budget for the coming fiscal year.
Nepal Stock Exchange (Nepse) index fell by 145.08 points or 6.52 per cent weekon-week in the trading period between May 30 and June 3 to settle at 2,078.70 points, an 18-month low. The last time the benchmark index had closed below the threshold of 2,100 points was on December 31, 2020, when it had rested at 2,087.28 points.
The sensitive index decreased to 6.83 per cent while the float index also fell by 6.19 per cent over the review week.
A total of 17.66 million shares were traded during the week, an increase of 9.17 per cent compared to 16.18 million shares that had exchanged hands last week. The market witnessed a turnover of Rs 6.20 billion compared to total traded amount Rs 5.69 billion the previous week.
The secondary market opened on Monday with the benchmark index at 2,223.78 points and it remained southbound the entire week. It had lost 50.33 points to close at 2,173.45 points. The market dropped further by 35.53 points on Tuesday to close at 2,137.92 points. On Wednesday, the Nepse index shed 7.19 points to close at 2,130.73 points. With a slide of 18.26 points on Thursday and fall of 33.77 on Friday, the benchmark index retreated below the psychological level of 2,100 points after a year-anda-half.
According to experts, the decline in Nepse is a result of negative reaction to the budget of the next fiscal year presented by Finance Minister Janardan Sharma at the Federal Parliament on Sunday as it did not address their issues.
They said that the budget has also failed to introduce notable packages for the country's secondary market Kumar Keshar Bista, a financial analyst and adviser, said that the replacement of credit-to-core-capital plus deposit (CCD) ratio by credit-deposit (CD) ratio in the monetary policy 2021-22 and the lack of liquidity in the financial sector are the major reasons for downward trend in the share market. "Market recovery could take up to a year if this situation persists."
He also informed that the deadline of August 23 given to margin loan holders to clear all arrears has also weighed on the investor sentiment. "Large investors have started offloading their shares to clear their dues, which has pulled down the market," he said.
According to Bista, share investors were largely disappointed to find there were no market-friendly announcements in the budget of next fiscal, and as their expectation of deduction of capital gains tax was also dashed.
The trading subgroup witnessed the biggest plunge of 11.43 per cent or 220.27 points to 1,707.59 points; followed by non-life Insurance by 10 per cent of 947.79 points to 8,534.67 points.
Life insurance was down 8.51 per cent or 113.93 points to 9,861.92 points; others landed at 1532.42 points, down 6.92 per cent or 113.93 points; manufacturing and processing fell 6.90 per cent or 370.95 points to 5,006.93 points.
Banking, the subgroup with the highest weightage in the market capitalisation, slumped 6.54 per cent or 101.37 points to 1,447.50 points. Investment sub-index lost 5.89 per cent or 4.23 points to 67.64 points; microfinance was down 5.54 per cent or 251.84 points to 4,297.90 points; development banks dropped 5.42 per cent or 206.57 points to 3,606.77 points; finance fell 5.23 per cent or 84.22 points to 1,525.75 points.
Hydropower landed at 2,425.76 points with a decline of 4.96 per cent or 126.70 points; hotels and tourism fell by 4.22 per cent or 119.54 points to 2,711.48 points and mutual funds dropped to 14.78 points, a drop of 3.59 per cent or 0.55 point.
Bista opined that if the government extended the deadline to pay margin loans, it could soothe the nerves of the share investors to some extent.
He further said there is no way for investors to recoup their losses unless the government makes some positive interventions.
A version of this article appears in the print on June 5, 2022, of The Himalayan Times.
