Long running slackness in the capital market has dragged down the Capital Gain Tax (CGT)--a revenue collected on the earning of investors from the stocks transactions.[break]
The benchmark Nepse, which is the indicator of investor´s confidence in the stock market, was recorded at 401.07 points on 26th October 2006. In the mid-January of 2010, Nepse had stood at 530.96 points.
Share analysts don´t see any possible improvement in the slackening stock market in near future given the dampening confidence of share investors.
Rabindra Bhattarai, share analyst, said prolonging slowdown in the share market, soaring interest rate on lending by bankers and swelling volume of shares listed in the Nepse, have discouraged new investors.
“Old investors have been trapped either in shares or reality sector whereas new aspirants are reluctant to enter the sluggish capital market. Much higher interest rates on lending by banks compared to return in share investment, has further repelled the potential investors,” Bhattarai told Republica on Wednesday.
Selling pressure is higher these days as investors are under pressure to pay quarterly interest on bank loan by mid-January. Increasing issue of right shares has forced existing investors to sell off their shares to buy right shares offered by companies.
“Arrivals of new shares in the market through Initial Public Offerings (IPOs) and right share issues by companies have sharply jacked up supply volume of shares dragging down the prices of shares,” said Bhattarai.
Total listed shares have now reached around 880 million units, almost double the 480 million units of shares recorded last September. The number of companies listed at Nepse has also reached 188 from 159 over a couple of years.
Share analysts also said unstable policy measures taken by the government has also battered the capital market. The government has already instructed stock brokers and Nepse to maintain records of investors exchanging shares worth over Rs one million in a single transaction.
Total daily turnover between mid-September and mid-November this year has dropped to Rs 20.19 million from daily turnover of Rs 32.7 million recorded between mid-December 2009 and mid-January 2010. Total turnover recorded at Nepse on Wednesday (Dec 8) was Rs 23.44 millions.
The persisting slowdown in stock market has not only inflicted loss to the stock investors but also has brought down the revenue the government earned from the capital market.
Nepse stated that CGT has dropped sharply to 29.43 million during the first four months (mid-July to mid-Nov) of current fiscal year 2010/11compared to Rs 130.97 million in the corresponding fiscal period of 2009/10. Total Rs 388.80 million was collected as the CGT during the same period of the fiscal year 2008/09.
Though the government had announced to lower the CGT rate from 15 percent to 10 percent through the last year´s budget, it couldn´t rejuvenate the capital market.
prabhakarji@gmail.com
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