Though the government lowered the rate of capital gain tax during this year through the budget, it failed to boost investor confidence. However, the declining rate of return in the stock market as compared to bank´s interest rates, oversupply of shares through fresh Initial Public Offerings (IPOs) and rights share in the secondary market pushed down the stock trading. [break]
Data compiled by Nepse shows that the number of listed securities soared up to 807.37 million units till mid-June this year, up from 619.65 million units listed till mid-June last year.
Nepse lost a total of 258.14 points over the year in which the benchmark Nepse began from 735.87 points on July 16, 2009 and ended at 467.33 points on July 15 (Thursday).
In response to the government´s announcement through current budget to lower the capital gain tax rate to 10 percent from 15 percent, Nepse had soared to this year´s record of 739.02 points on July 20, 2009.
However, the government apathy to revive sluggish capital market that has witnessed deteriorating investors´ confidence continued to push down the Nepse index to this year´s record low at 405.45 points on April 28, 2009.
Over a year market capitalization -- total worth of shares-- also dropped from Rs 503.35 billion on July 16, 2009 to Rs 367.30 billion on Thursday, the last trading day of fiscal year 2009/10.
“Mounting selling pressure amid higher bank interest rates amid liquidity crunch, frequent margin call by banks to share investors and flooding of new shares into the capital market are the major factors that have been dragging down Nepse index. This trend would continue until and unless government comes up with a special package to revive investors´ confidence,” said Nanda Kishore Mundada, president of Nepal Stock Brokers Association.
Month-long agitation of share investors, who put forward 22-point demands with the government to rekindle the confidence of investors, also disrupted the share trading and pushed down Nepse in February.
Worried investors resorted to stirs alleging that the government did nothing to rejuvenate the stock market that is witnessing unprecedented slowdown that dragged down the Nepse index to its lowest in three years.
Fall in share price of Nepal Telecom (NT) by Rs 36 per share to Rs 467 pushed down the Nepse by 11.1 points to 489.61 points in March 10.
Prolonging sour relationship between the Finance Ministry and Securities Board of Nepal (SEBON) over the permission to issue 19 percent promoters shares to the public dragged down Nepse index by 11.26 points to 443.17 points on March 30.
On the eve of Maoist protest against the government, Nepse dropped to a 42-month low to 405.45 points on April 28.Transactions in Nepse came to a grinding halt due to week long protest that began from May 2. Nepse had touched a record high at 1175.38 points on August 31, 2008.
However, Nepse shot up by 12.79 points to close at 431.56 on May 11 with the creation of favorable political environment following the withdrawal of indefinite protests.
Similarly, Nepse responded positively to the all party consensus to extend the term of Constitution Assembly (CA) by a year on May 30 when Nepse surged by a whooping 26.95 points to reach at 506.35 points.
Continued political uncertainty in the aftermath of CA term extension took its toll on Nepse pushing its index to 455.75 points on June 30.
However, Nepse bounced back on July 1 jumping up by 15.16 points to reach 470.91 points with the hope of stable government after the resignation of the prime minister.
With the introduction of mandatory provision for stock brokers to keep record and report to Nepal Rastra Bank about the investors whose per day transactions of shares exceed one million rupees, Nepse dropped by 6.22 points to 464.69 points on July 2.
prabhakar@myrepublica.com
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