NEPSE extends losing streak after monetary policy, Falls 50 points in three trading sessions

KATHMANDU: Nepal’s stock market has remained under pressure since the Nepal Rastra Bank (NRB) unveiled its monetary policy for the upcoming fiscal year, with the benchmark Nepal Stock Exchange (NEPSE) index shedding nearly 50 points over the past three trading sessions amid investor uncertainty over new lending provisions and year-end selling pressure.

The central bank announced the monetary policy on Tuesday. Since then, the NEPSE index has declined for three consecutive trading days, dropping 30.09 points on Wednesday, 19.67 points on Thursday and a further 1.13 points on Friday, taking the cumulative loss to 50.89 points.

On Friday, the benchmark index slipped from 2,601.92 points to close at 2,600.78, despite witnessing a sharp rise in trading activity.

According to NEPSE, daily turnover increased significantly to Rs 6.86 billion on Friday from Rs 4.61 billion recorded a day earlier, indicating heightened investor participation even as the market remained in negative territory.

The market initially opened on a positive note, with the benchmark index climbing by as much as 20 points during early trading. However, profit booking and selling pressure erased those gains, pushing the market into the red by the close.

Market analysts attribute the recent decline largely to investor concerns over a key provision introduced in the new monetary policy, which states that the loan-to-value limit for share-backed loans will be determined based on the financial strength of individual institutions.

The provision has created uncertainty among investors regarding how banks will implement margin lending in the coming months.

Currently, banks are allowed to provide share-backed loans of up to 70 percent of the lower value between the 180-day average market price and the prevailing market price of listed shares. Investors are now awaiting further regulatory clarity on how the new framework will be applied.

Apart from policy-related concerns, market participants also pointed to seasonal factors behind Friday’s selling pressure.

With the end of the Nepali fiscal year approaching, many investors are liquidating shares to arrange funds for loan installment and interest payments due by the end of Asar. Shares sold by Friday are expected to be settled before the fiscal year closes, enabling investors to meet their banking obligations on time.

This year-end liquidity requirement has increased supply in the secondary market, adding further downward pressure on share prices.

Market breadth remained negative on Friday, with 135 companies posting losses, while 120 stocks advanced and 19 remained unchanged.

Among sectoral indices, the banking sector declined by 0.17 percent, development banks by 0.39 percent, finance companies by 0.29 percent, hotels and tourism by 0.37 percent, hydropower by 0.27 percent, life insurance by 0.09 percent, and the others category by 0.23 percent.

In contrast, a few sectors managed to end higher. The investment index gained 0.14 percent, the manufacturing and processing sector rose 0.25 percent, microfinance advanced 0.13 percent, and the non-life insurance index increased 0.40 percent.

On the gainers’ list, Atmanirbhar Laghubitta Bittiya Sanstha led the market with a 10.66 percent rise in its share price, followed by Kumari Equity Fund, which climbed 9.09 percent, while Aalanga Hydropower Company gained 6.92 percent.

On the losing side, Bhagawati Hydropower Company recorded the steepest decline of the day, with its share price falling 7.78 percent.

The continued weakness in the market suggests that investors remain cautious as they assess the implications of the new monetary policy while also navigating year-end liquidity requirements. Market participants are now expected to closely watch further clarification from the Nepal Rastra Bank regarding the implementation of share-backed lending provisions, which could influence investor sentiment in the coming weeks.