Nepal share market eyes boost as new governor prepares first monetary policy

KATHMANDU: As Nepal Rastra Bank (NRB) welcomes its new Governor, Dr. Bishwanath Paudel, who assumed office on Jestha 7, 2082 (May 21, 2025), the share market is abuzz with anticipation for his first monetary policy, expected in Shrawan 2082 (July 2025).

Historically, NRB governors have debuted with market-friendly policies, a trend that has shaped investor expectations and market dynamics, particularly in the Nepal Stock Exchange (NEPSE). With the economy grappling with a prolonged slowdown, Paudel’s policy could be a pivotal moment for revitalizing investor confidence and addressing systemic challenges.

The tradition of lenient inaugural monetary policies began with Dr. Yubaraj Khatiwada in Shrawan 2067 (July 2010), who relaxed share-backed loan rules, boosting the stock market and encouraging mutual fund transactions among banks.

Dr. Chiranjibi Nepal followed suit in Shrawan 2072 (July 2015), introducing measures like bank capital increases and mergers that spurred market growth. Maha Prasad Adhikari, starting in 2076 (2020), adopted a loose policy during the COVID-19 crisis, ensuring high liquidity that sustained a booming share and real estate market, with NEPSE peaking at 3,199 points in Bhadra 2078 (August 2021). However, Adhikari’s later policy tightening drew criticism, contributing to market volatility as he exited in Chaitra 2081 (March 2025).

Paudel inherits an economy marked by sluggish growth over the past two to three years, with external pressures prompting NRB to impose strict lending controls since 2078 (2021), including a NPR 20 crore cap on individual share-backed loans.

Despite favorable conditions like low interest rates and high liquidity, NEPSE has struggled, dropping from 2,890 points in Falgun 2081 (February 2025) to 2,688 today. Last Asar (June 2024), a political coalition shift briefly pushed NEPSE to 3,000 points, with a record NPR 29.95 billion in transactions by Shrawan’s end (July 2024). Yet, market confidence remains fragile, influenced by political fluctuations and regulatory constraints.

Investors are hopeful Paudel will adopt a lenient policy to stimulate the market. Dharmaraj Sapkota, former president of the Stock Brokers Association of Nepal, noted, “Investors expect a softer policy from the new governor, as his predecessors’ arrivals often sparked market optimism.”

However, analysts caution that systemic issues, such as the economy’s reliance on budget-driven reforms and delayed policy decisions, must also be addressed. Dipesh Kumar Vaidya, CEO of NMB Capital, emphasized, “The market’s trajectory depends on investor confidence, which Paudel’s policy will influence. We’ll need to see his approach.”

The upcoming budget on Jestha 15, 2082 (May 29, 2025), also looms large, with investors watching how it addresses the economic downturn. “The economy has been declining, deterring new investments, as evident in bank lending trends,” an analyst observed.

Paudel’s policy, combined with the budget, could either restore market momentum or deepen existing challenges. As Nepal navigates political and economic uncertainties, the new governor’s first move will be critical in setting the tone for his tenure and the share market’s future.