Nepse, the barometer of investors´ confidence in stock market, dropped to 444.76 points on Tuesday from 662.71 points recorded in mid-April 2009. Except for mid-June to mid-July when Nepse gained about 60 points, the benchmark index continued to move in the negative trajectory in term of its monthly movement. [break]
If the past trend of Nepse´s movement is anything to go by, Nepse index takes upward trend in June and July when most of the companies submit their financial status to the Securities Board of Nepal (SEBON), the stock market regulator.
The country´s sole capital market also saw a loss of over Rs 78 billion in market capitalization -- total worth of listed shares -- over the period. Total market capitalization declined to Rs 344.45 billion in mid-April this year, down from Rs 422.07 billion recorded in mid-April, 2009.
Banking and Development bank groups saw their sub-indices decline to 418.56 points and 463.53 points from 664.72 points and 842.51 points respectively recorded in mid-April last year.
Likewise, the sub-indices of Hydropower and Finance groups also plunged to 713.69 points and 437.09 points from 864.45 points and 761.35 points respectively over the period. Other trading groups also saw huge decline in their sub-indices.
Nepse had climbed to 735.87 points in mid-July last year, up from 676.41 points recorded a month earlier.
“Dampening investors´ confidence due to a host of economic factors, including liquidity crunch and higher bank interests as compared to rate of return in shares investment, are among the major factors behind persisting slowdown in the stock market, Rabindra Bhattarai, a stock analyst, told myrepublica.com.
He said concerns on overflow of shares due to possible arrival of promoters´ shares in the capital market, attraction of investors toward gold and arrivals of abundant shares in the market through Initial Public Offerings (IPOs) and increasing distribution of right shares adversely affected the market.
Similarly, rising interest rates set by banks and overheated real estate sector are also the factors that affected the capital market. Tightened policy by banks on margin lending --loan against the deposit of share -- and government scrutiny on investors having transactions of shares worth more than Rs 1 million also discouraged share investors.
Share analysts say Nepse´s journey to the red zone will continue as long as the problem of liquidity crunch remains unaddressed and interest rates of banks do not come down on par with the rate of return from the capital market.
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