In the previous week, the market had closed on 1283.52 points.
After a slow start to this week -- growing in mere percentage points during Sunday and Monday, the stock market returned to its bullish path on Tuesday, with the Nepse Index up 5.58 points on the day. In the next two days, the index crept up in small but significant steps as investors continued pouring money expecting the capital-starved bank and financial institutions (BFIs) to offer more stock dividends and rights issues in the coming days, brokers say.
The prices of shares of most of the listed companies, particularly BFIs, have mostly been continuously rising following an announcement by Nepal Rastra Bank (NRB) on July 2015 in its monetary policy for Fiscal Year 2015/16 that it would increase BFIs' minimum paid-up capital requirement by multifold.
"BFIs have been handing out large stock dividends and are bound to offer more bonus shares next year to meet the new capital requirement," Narendra Sijapati, a former president of Stock Brokers Association of Nepal (SBAN), says. "There is excess liquidity in the banking system which has driven down interest rates to record lows so returns from deposits are very low. At the same time this means many investors are getting cheaper money. So they are pouring that money into stocks," he adds.
The full-fledged implementation of the dematerialized form of shares-trading has also added fuel to the bullishness of the market, Sijapati says.
"Investors feel that trading has become easier. Ownership transfer of bought shares can now happen in four to five days using demat accounts. Technology has also become a factor in boosting the stock market."
For Anjan Raj Poudyal, another former president of SBAN, the investors' attraction toward shares of microfinance and insurance companies is a major reason for the rise in the stock market.
"Microfinance companies hold a certain charm for investors. They have relatively few shareholders and earn big profits. Last year's announcement by NRB Governor Chiranjibi Nepal that the central bank will increase the minimum paid-up capital requirement for microfinance institutions drew increased microfinance companies' attraction," Poudyal says. "There is also speculation that insurance companies will be told have to raise their minimum paid-up capital requirement following direction from its regulator -- Beema Samiti -- to restrict cash dividend. This has sent the Insurance group sub-index up by triple digits during the week," he says.
The Insurance group was the highest gainer of the week with its index climbing 118.01 points to settle at 5,588.71 points. The index of the Development Bank group -- to which microfinance companies belong to -- jumped 69.79 points to end at 1,338.2 points. The Finance group index ended 40.1 points higher at 691.03 points. The indices of Hotels and HydroPower groups also went up 30.82 points and 12.03 points, respectively, to finish at 1,732.56 points and 2,232.68 points. The 'Others' group and the Banking groups' index inched up 1.17 points and 0.73 points, respectively, closing at 828.24 points and 1,185.51 points. The indices of the Manufacturing and Processing group and the Trading group remained unchanged at 1,998.78 points and 201.38 points.
A total of 4.75 million units of shares of 13.8 companies worth Rs 2.79 billion were traded in the stock market this week through 13,464 transactions.
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