Kathmandu, Feb. 21
Share market in Nepal
has continued to make records in terms of rise in the index as well as
transaction amount but many still worry whether the bullish trend would
continue for a foreseeable future.
The Nepal Stock
Exchange (NEPSE) index reached 2640.34 points on Sunday making an all-time
record. By the end of the previous fiscal year 2019/20 in mid-July, the index
was at 1362.4. It was the time when the market was gradually opening and
investors began to make securities transaction in an online system.
The market had got a
correction in pre-coronavirus period when it had reached 1881 points and
witnessed a bearish trend to lose more than 500 points.
In less than eight
months' period, the share market index has almost doubled. And experts say this
bullish trend would continue in the days to come.
Reasons – low interest
rate in margin lending, disposable liquidity with the investors as well as the
new entrants of the share markets and political uncertainty.
The government and
regulators of the financial markets – the Nepal Rastra Bank and Securities
Board of Nepal, and other concerned bodies generally do not make significant
policy correction during transition period. As the country is in confusion
about the election for the House of Representatives of the Federal Parliament,
investors are confident that there would not be any untoward action or policy
backlash on the capital market.
This time, the market
was not just gone up on the whims of a handful investors but is witnessing a
growth on solid grounds of technological advancement, market expansion,
liquidity and investors' awareness, said Prakash Tiwari, a stock market
analyst.
According to him, the
share market has made bounds after political turmoil or disasters like the
Royal Palace Massacre, civil war and coronavirus pandemic. The post-COVID
bullish performance can be attributed to the trend.
"Meanwhile, the
capital market in the country had undergone a massive automation. The online
share transaction platform and electronic payment system had proved a massive
incentive to the share market investors," said Tiwari.
Electronic demat
registration and share transaction increased the access of people from the
remote areas to the share market. As a result, the Initial Public Offerings
(IPOs) that announced after the COVID-19 lockdown had witnessed massive
application. For instance, Nepal Infrastructure Bank's IPO was applied by more
than 1.47 million applicants for 167.21 million units of shares.
Recent IPO of Mahila
Laghubitta Bittiya Sanstha, a class 'D' microfinance institution, was
oversubscribed by 62 times. About 1.57 million applicants applied for 24.61
million units of shares while the company had issued just 400,000 units of
shares.
Former Chairman of
Investors' Forum Raj Kumar Timilsina said that the comfortable interest rate
and possibly growing liquidity due to the election would hold the market at
least to the position it is at now.
"The market will
not immediately go down. Investors gained more confident as the central bank
did not review the interest rate in the mid-term review of the monetary
policy," he said.
Meanwhile, more people
were attracted to the stock market as many people earned a good amount of money
after investing in both the primary and secondary market.
The trend is expected
for another year, according to the investors and stock market experts. They say
that Nepal's share market makes bullish to bearish trend and vice-versa in
about three and a half years.
However, Tiwari and
Timilsina both recommend the investors to apply cautions while selecting a
company to buy its equity at the secondary market.
Anomalies like insider
trading must be curbed, there should be more supervision in the share market,
said Tiwari.
According to him,
inactivity in the part of the regulators and the government might result in
accident and small investors would lose a huge amount of money.
Published in The Rising Nepal daily on 22 February 2021.
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