Nepal Stock Market crash wipes out Rs 450 billion in a week, Panic selling deepens amid policy fear

KATHMANDU: Nepal’s stock market has entered a sharp correction phase following the formation of the new government, erasing investor wealth worth over Rs 450 billion within just one week, raising serious concerns over market stability and investor confidence.

The benchmark Nepal Stock Exchange index has plunged by 9.59 percent, losing 284 points since the new administration took office. The index, which stood at 2,960 points before the government transition, has now dropped to 2,676, reflecting a rapid deterioration in market sentiment.

Market capitalization has also taken a significant hit, declining from around Rs 50 trillion to Rs 45.5 trillion during the same period—effectively wiping out massive investor wealth in a short span.

On Sunday alone, NEPSE fell by 3.79 percent (105 points), signaling intensified selling pressure across sectors.

Policy Shock and Psychological Panic Drive Sell-Off

Market participants attribute the steep decline primarily to growing fears triggered by the government’s aggressive actions against business groups under anti-money laundering investigations. Reports of asset freezes and arrests of prominent business figures have created a ripple effect across the investment community.

According to former president of the Stock Brokers Association, Narendra Sijapati, large investors—who typically hold substantial market positions—may be offloading shares amid uncertainty.

“The fear that major business groups are under scrutiny has created panic. When large holders start selling, it naturally accelerates the decline,” he said.

He added that rumors and speculation have further amplified the downturn, pushing retail and institutional investors alike to exit positions in fear of deeper losses.

Market Driven by Fear, Not Fundamentals

Stakeholders argue that the current downturn is largely psychological rather than fundamentally driven. While anti-money laundering enforcement is a routine regulatory function, the perception that more high-profile investors could be targeted has shaken confidence.

Current president of the association, Sagar Dhakal, noted that the fear may be short-lived but has already caused “abnormal” market behavior.

“The market should not fall simply because the government is enforcing laws. But sentiment drives markets, and right now sentiment is negative,” he said, adding that recovery could begin within days if confidence returns.

Government Signals Reform, But Market Remains Unconvinced

Finance Minister Swarnim Wagle has previously stated that the government is committed to transparency, governance, and long-term development of the capital market. However, these assurances have yet to stabilize investor sentiment.

Regulatory authorities, including Securities Board of Nepal, have also acknowledged the need to strengthen investor confidence while continuing market reforms.

SEBON Chair Santosh Narayan Shrestha said efforts are underway to improve market governance alongside investor protection measures.

Liquidity Intact, But Buyers Missing

Despite favorable macroeconomic indicators—including low interest rates, strong foreign exchange reserves, and limited alternative investment avenues—buyers remain weak in the market.

Market insiders say the absence of strong buying support has accelerated the fall, with some investors fearing the index could drop further toward the 1,800 level if panic persists.

Investor Protests Begin

Amid continued losses, a section of investors has begun protesting, accusing the government of failing to reassure the market or implement necessary reforms.

During a demonstration near Singha Durbar, investor Tilak Koirala said while action against financial irregularities is justified, the government must also take responsibility for stabilizing the market.

“There should be simultaneous efforts to enforce law and support the capital market. Silence during such a downturn is not acceptable,” he said.

Investor groups have called for accelerated reforms, improved market infrastructure, and clearer communication from policymakers to restore confidence.