The stock market is on a bullish trend for the past few months as the regulatory requirement to raise paid-up capital of listed companies of different sectors has buoyed investors.The stock market rally began seven months ago when Nepal Rastra Bank (NRB) decided to raise the minimum paid-up capital of bank and financial institutions (BFIs). The expectation among investors that the insurance companies as well as microfinance companies will also have to raise their minimum paid-up capital has fuelled the rally further.
"Earlier, it was the decision of the central bank to raise paid-up capital that propelled the stock market to a new high. Now there are speculations that insurance companies as well as micro finance institutions will also have to increase their minimum paid-up capital. This is driving up the stock market in recent weeks," Narendra Sijapati, former president of Stock Brokers Association of Nepal (SBAN), said.
Liquidity surplus in the banking system is the other reason behind the bull run in the country's only bourse. Falling interest rates have encouraged investors to buy more shares, instead of parking their money in bank accounts, according to stock market analysts. "The better-than-expected performance of the listed companies, particularly BFIs, in the second quarter despite all odds has also supported the market growth," added Sijapati.
However, there are many who doubt sustainability of the bullish trend, arguing that there is no reason for investors to become jubilant.
Insurance group led the gaining side this week, as its sub-index gained 199.61 points to close at 6,151.51 points. Hotels group ended 6.98 points higher at 1,753.43 points. Banking, the heavyweight group, also gained 5.44 points to close at 1,195.23 points. The sub-indices of Hydropower and Finance groups also went up by 3.03 points and 2.3 points, respectively, to close the week at 2,314.83 points and 675.08 points. 'Others' group also rose 2.35 points to settle at 824.72 points.
Development Bank, however, shed 17.65 points to close at 1,357.24 points. Manufacturing and Processing, and Trading sub-indices remained unchanged at 1,998.78 points and 201.38 points.
A total of 6.71 million units of shares of 145 companies worth Rs 2.89 billion were traded in the market through 18,407 transactions this week.
Related story
Nepse ends in green for four consecutive weeks
