Nepal’s Stock Market capitalization surges, Signaling rising role of public companies in the economy

KATHMANDU: Nepal’s stock market capitalization has recorded strong long-term growth over the past eight years, reflecting the increasing dominance of public companies in the national economy and a gradual shift toward market-based financing.

Data extracted from Nepal Rastra Bank (NRB) show that despite periods of volatility, the overall trend of market capitalization has moved upward, underscoring the expanding role of the capital market in economic activity.

According to NRB data, Nepal’s stock market capitalization stood at Rs 1,856.80 billion in mid-July 2017. The following year, in 2018, capitalization declined sharply to Rs 1,435.14 billion, reflecting weak investor sentiment, political uncertainty, and limited corporate earnings growth at the time. However, the market began to recover in 2019, with capitalization rising to Rs 1,567.50 billion.

The upward momentum continued in 2020, when market capitalization increased to Rs 1,792.76 billion. Despite economic disruptions caused by the COVID-19 pandemic, the stock market showed resilience, supported by excess liquidity in the banking system and increased participation from retail investors.

The most dramatic expansion came in 2021, when Nepal’s stock market capitalization surged to Rs 4,010.96 billion. This historic rise was driven by low interest rates, aggressive credit expansion, high investor optimism, and a surge in new investors entering the market.

Public companies, particularly banks, hydropower firms, insurance companies, and finance companies, saw significant increases in share prices, sharply boosting overall market value.

In 2022, market capitalization declined to Rs 2,869.34 billion as tighter monetary policy, rising interest rates, and regulatory measures cooled the overheated market.

The correction highlighted the sensitivity of Nepal’s stock market to policy shifts by Nepal Rastra Bank and changes in liquidity conditions.

The market stabilized again in 2023, with capitalization rising to Rs 3,082.52 billion. This recovery continued into 2024, when stock market capitalization increased further to Rs 3,553.68 billion.

The upward trend strengthened in 2025, with market capitalization reaching Rs 4,656.99 billion, the highest level recorded so far.

Economists say this long-term growth reflects the rising importance of public companies in Nepal’s economy. Listed companies now play a larger role in mobilizing savings, financing investment, and supporting economic expansion.

The growing size of the stock market indicates that more capital is being channeled through formal financial markets rather than remaining idle or limited to traditional banking channels.

The dominance of banks and financial institutions in market capitalization also highlights the central role of the financial sector in Nepal’s economy.

However, the increasing presence of hydropower, insurance, manufacturing, and service-sector companies suggests gradual diversification within the capital market. As more companies go public, the stock market is becoming a broader reflection of the real economy.

Rising stock market capitalization also has implications for government policy and economic stability. A stronger capital market can reduce pressure on banks by providing alternative sources of financing for large projects, particularly in infrastructure and energy.

This is especially important for Nepal, where banks have historically carried the bulk of long-term financing risks.

At the same time, experts caution that rapid increases in market capitalization must be supported by strong corporate fundamentals.

Price-driven growth without corresponding improvements in profitability, governance, and transparency can create systemic risks. The sharp rise in 2021 and subsequent correction in 2022 serve as reminders of the need for balanced growth.

Nepal Rastra Bank has increasingly recognized the importance of capital market stability as part of overall financial system health.

Coordination between monetary policy, capital market regulation, and fiscal policy is seen as critical to sustaining investor confidence and long-term growth.

For the broader economy, the expansion of market capitalization signals growing public participation in wealth creation through equity investment.

As households increasingly invest in shares, the stock market is becoming more closely linked to consumption, confidence, and economic expectations.

Overall, the data show that Nepal’s stock market has evolved into a significant pillar of the economy.

While challenges remain, the rising dominance of public companies suggests that the capital market will play an increasingly important role in shaping Nepal’s economic future.