Investor wealth shrinks by Rs 403 billion as fear continues to grip Nepal’s stock market

KATHMANDU: Investor wealth in Nepal’s stock market has declined by more than Rs 403 billion (Rs 4.03 kharb) since the formation of the new government, reflecting growing uncertainty and weakening investor confidence despite initial optimism surrounding political change.

Market capitalization, which stood at Rs 5.018 trillion (Rs 50.18 kharb) on Chaitra 10, has fallen to Rs 4.614 trillion (Rs 46.14 kharb) as of Thursday, wiping out a significant portion of investors’ paper wealth.

The market had initially responded positively to the prospect of a government led by new political forces. However, that enthusiasm faded as a series of investigations, arrests of prominent business figures, and regulatory actions created concerns among investors about the broader business environment.

Market participants say the recurring news of arrests and legal proceedings involving businesspersons has contributed to a climate of caution.

“Investors are not necessarily worried because they have done anything wrong, but repeated reports of arrests and investigations are affecting market sentiment,” a stockbroker said. “Whenever the market attempts to recover, another incident emerges and confidence weakens again.”

Finance Minister Dr. Swarnim Waglé has repeatedly stated that only those involved in wrongdoing should be concerned. Nevertheless, market participants argue that the government has yet to fully restore investor confidence.

Technical Indicators Signal Heavy Selling Pressure

Recent market indicators suggest that selling pressure remains dominant.

The 14-day Relative Strength Index (RSI) of the NEPSE has fallen to around 16, indicating that the market is in an oversold zone. Over the past 14 trading sessions, the benchmark index has declined on 10 occasions.

In technical analysis, an RSI reading between 0 and 30 signals excessive selling, while readings between 30 and 70 indicate balanced trading activity. A reading above 70 generally reflects aggressive buying momentum.

The current RSI level suggests that sellers significantly outnumber buyers and that short-term market sentiment remains weak.

Analysts say declining confidence and growing risk aversion among investors have encouraged many market participants to liquidate positions as prices continue to fall. However, they also note that extremely low RSI levels can sometimes precede a market rebound, although such signals alone are insufficient to confirm a sustained recovery.

New Money Yet to Enter the Market

While every share sold is ultimately purchased by another investor, market indicators suggest that fresh capital inflows remain limited.

The market’s Money Flow Index (MFI) is currently around 31, signaling continued capital outflows and weak liquidity conditions.

Similarly, the Accumulation/Distribution indicator has remained negative for the past six consecutive trading days, indicating that distribution, or selling activity, continues to outweigh accumulation. Although the indicator remains positive over a longer 24-day period, its downward trajectory reflects weakening buying interest.

These trends indicate that while the market may be approaching oversold levels, recovery efforts are struggling to gain momentum due to the absence of strong new investment inflows.

Brokers See Limited Downside Ahead

Despite current weakness, some brokers believe the market may be nearing a bottom.

According to market participants, the listing of numerous new companies in recent years has increased overall market capitalization and altered index dynamics. They argue that many stocks have already fallen close to their historical lows, limiting the scope for further significant declines.

More than 80 listed companies are currently trading near their lowest price levels, according to market observations.

Investors are also awaiting the upcoming monetary policy from the Nepal Rastra Bank, which is expected to provide direction for the financial sector and capital market.

“Positive provisions related to listed banks and financial institutions in the new monetary policy could help improve market sentiment and support a recovery,” a broker said.

As Nepal’s stock market navigates a period of uncertainty, analysts say the next phase will largely depend on policy signals, investor confidence, liquidity conditions, and whether fresh capital begins flowing back into the market. For now, however, investors remain cautious as more than Rs 400 billion in market value has already been erased since the government took office.