KATHMANDU, July 27: Nepal Stock Exchange (Nepse) index gained a whopping 50.57 points, a 5.04 percent hike, on Sunday -- the first trading day of the week, indicating that the market is setting up for a bull run.
The market was on an upward trend from the very first minute of the day's trading as frenzied investors scrambled to get shares, mostly of banks and financial institutions (BFIs).The decision of Nepal Rastra Bank (NRB) to raise minimum paid-up capital requirement for the BFIs by up to four times, through the recently unveiled Monetary Policy for 2015/16, has been a major factor pushing Nepse up. The benchmark index had logged gains of 40.11 points on Thursday -- the last trading day of the market -- when the NRB unveiled the monetary policy.
Investors' expectation of handsome stock dividend from BFIs to meet the minimum capital requirement over the next two years has driven up the market. "
"The confidence among investors that BFIs will have no alternative to offering bonus and rights shares over the next two years has been prompting them to buy stocks of banks, development banks and finance companies," Nanda Kishore Mundada, chairman of Shree Krishna Securities -- a brokerage firm -- told Republica.
The intense buying pressure forced Nepse to clamp circuit breaker three times on Sunday. As a result, the market remained opened for only half an hour.
All three brokerage firms that Republica visited on Sunday were jam-packed with buoyant investors scrambling to place buying orders. "The market is on the bullish trend and it will climb further. I don't want to squander this opportunity as the share price is less likely to come down anytime soon," Prem Bahadur Maharjan, an investor that Republica met at Kalika Securities, in Putalisadak, said.
While Nepse closed at one-year high on Sunday, observers claim that the stock market is on course to climb to record high. "Look at the speed of growth, the benchmark index is likely to make new record soon. The NRB decision on paid-up capital requirement, positive political development and liquidity surplus, among other factors, signals that market is walking on the bullish trend," Anjan Raj Poudyal, former president of Stock Brokers Association of Nepal (SBAN), said.
According to analysts, the positive development among political parties on constitution drafting process has boosted confidence of investors. Likewise, liquidity surplus of around Rs 100 billion in the banking system is the other factor behind rise in Nepse index, as investors are getting bank financing easily.
"The market, however, will retreat after reaching some point as the current stock market is not the same as two or three years ago. There are institutional investors who also play significant role in the market unlike the earlier trend when individual investors would dominate market," Poudyal added.
The benchmark index had plunged to an all-time low of 292.31 points on June 15, 2011 after climbing to a record high of 1,175.38 points on August 31, 2008. The stock market was on track to break the record on July last year, with the benchmark index touching six-year high of 1,073 points on July 27.
However, the market started treading downward after the NRB enforced a decision for BFIs to limit their 'held for trading' to one percent. The devastating earthquake of April 25 and aftershocks thereafter also affected Nepse's recovery.
All the companies except Siddhartha Investment Growth Scheme-1 registered gain in the market on Sunday.
A total of 1.7 million units of shares worth Rs 340.36 were traded in the market today through 802 transactions on Sunday.
Related story
Weekly Commentary: Nepse up for a second straight week as inves...
