Calling the stock market an evolutionary form of imperialism without taking into account the effect of its expression on the psychology of the market may be the product of the thinking of a person with high political leadership and the organisation he leads, but it must be pre-evaluated to see how it affects the investor
Some political parties and investors have objected to the offensive remarks made by the top political leadership of the CPN-Maoist Centre recently, which sent a wrong message in the capital market.
Chairman of the party Pushpa Kamal Dahal 'Prachanda' recently said that it was correct to call the capital market a developed form of imperialism. After this statement, the NEPSE index has been gradually declining.
Prachanda's secretariat said on Twitter that the theoretical issue raised by Chairman Prachanda about the capital market was correct. However, it said the party would take conscious initiative and make efforts to protect the investment of investors in the stock market, and also protect the interests of smaller investors.
In principle, the stock market promotes economic growth by increasing investment and productivity.
Savings go to the corporate sector, and economic growth is expected. There is a positive correlation between stock market growth and economic growth, but in between, sometimes questions are raised. To reiterate, why did the share market rise even when the real economy of Nepal was weak in the past? The stock market is affected not only by politics but also by policy decisions around the world. However, the recurring political instability in Nepal has had an immediate impact on the stock market, but the political parties should take the rising stock market as a message from the investors to the politicians.
Investment in the share market has increased due to the accumulation of investable funds in the banks and financial institutions as there is less demand from the private sector and also due to lower interest rates.
The general public, unaware of the functioning of the stock market, likens it to a casino. It occupies such an influential place in the economic theory of production and distribution that it is natural to have an equally important place in the theory and practice of economic development.
From a historical or analytical or policy point of view, it lays emphasis on savings, and capital markets can be described as management and supply of capital.
Higher rates of capital formation generally lead to faster growth in production and income. The capital market is important for all financial instruments, be it short-term or long-term or commercial, industrial and government financial instruments.
The capital market refers to all the institutions and medium and long-term fund raising mechanisms through various means available in stocks, debentures and bonds. In these markets, both private sector and public sector corporates raise billions of rupees.
Major components of the capital market are the stock exchanges, banks, investment funds and companies, specialised financial institutions or development banks, mutual funds, savings banks and non-banking financial institutions.
In addition, the establishment of the Nepal Stock Exchange (NEPSE) has brought about significant changes in the functioning of Nepal's capital market, especially since the liberalisation policy adopted in the 1990s and the automation of trade and operation of the central depository system a few years ago.
The rise in Nepal's stock market, which reached record highs, was sustained a few days back. The NEPSE index, which measures the stock market, has increased significantly and the transaction amount has also increased.
Meanwhile, the Securities and Exchange Board of Nepal (SEBON) has stated that the participation of investors in the share market has increased significantly as more than 85 percent of the transactions are done through NEPSE's online trading system.
According to the board, there are more than four million investors in the primary market of the securities due to the development of the securities market and the reforms carried out by the board, which is about 14 percent of the total population. Emphasis should be placed on ensuring that small investors have access to credit to play in the stock market.
Calling the stock market an evolutionary form of imperialism without taking into account the effect of its expression on the psychology of the market may be the product of the thinking of a person with high political leadership and the organisation he leads, but it must be pre-evaluated to see how it affects the investor.
The capital market has to move at its own pace and speed without any external influence, and if the market crashes, it will have a profound effect on many other sectors, and the economy will fall into a vicious cycle.
In the current context, it is important for communist leaders to study the background of Deng Xiaoping's path to power in China from 1978 to 1989, how he developed capitalism, and how China has become the world's second largest economy. It is well known that the Chinese capital market has played a major role in bringing China to where it is today. China's stock exchange is one of the most sophisticated in the world. Recognising the importance of capital, Deng led the country into a capitalist system during his 11-year leadership.
India's capital market also provides 'capital supply' for new companies.
A new company needs money and raises it from the capital market. By mobilising that capital, it produces, creates employment, earns income and pays taxes on it.
This is just a representative example of how the capital market has a multidimensional effect on the economy. The capital market is affected by information, the financial condition of a company, the economic condition of the country, the political reasons and the market condition. Therefore, the capital market is largely 'predictable'.
The Finance Minister has called upon the share investors to invest by choosing a company that will provide long-term benefits.
Investors thus expect a positive message in the capital market and full implementation of policy and direction of action.
A version of this article appears in the print on December 23, 2021, of The Himalayan Times.
