Nepse in a free fall as investors grow wary of ‘left alliance’

Published On: October 10, 2017 08:34 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Oct 10: Nepal Stock Exchange (Nepse) benchmark index nosedived 40.76 points in the first two trading days of the week to close at 1,501.89 points on Monday.

While the stock market fell 32.64 points on Sunday, the benchmark index decelerated further by 8.12 points on Monday.

Analysts attribute the free fall of stocks to the investors' apprehension about the recently formed 'left alliance'. 
Investors are wary of the recent announcement of CPN-UML, CPN (Maoist Center) and Nayashakti Party Nepal to forge alliance for the upcoming elections and subsequently unify the three parties. Through a press meet held on last Tuesday, the leaders of the three parties had made the announcement of going into the upcoming central and provincial parliamentary elections by forging an alliance and eventually unifying the three parties.

The electoral alliance of the three 'left parties' had received a frosty reception from the investors from the next trading day after such announcement. The benchmark index had gone down 13.7 points on the next trading day of the announcement of electoral alliance of three communist parties. The stocks have not recovered since then.

“There were expectations that the stocks would rise after the Dashain festival as there were indications that the interest rates will normalize. However, the market took a downward trend mainly due to the confusion among the investors about recent political development,” said Narendra Sijapati, former president of Stock Brokers Association of Nepal (SBAN), who was referring to the recent alliance of the three communist parties.

“This shows that there is still communist phantom haunting the investors. While the formation of alliance does not mean that there will be communism in the country immediately, investors' response is mainly due to the perception of these left parties toward the stock market,” he added. 
The daily turnover has also come down in the aftermath of the Dashain festival. While there used to be the turnover of Rs 800 million per day in an average before the festival, such turnover fell to Rs 316.81 million on Monday. 

“This is like off-season in the market as many investors remained away from the capital city to celebrate Dashain and Tihar festivals,” added Sijapati, who is also the managing director of Kalika Securities. 

Most of the trading groups ended in the red zone. Observers say that the stocks are less likely to recover until Tihar festivals are over. “The fear of communist alliance will go away in a few days. The stocks could recover if interest rates will start to normalize and come down,” said Subha Kumar Paudal, a stock investor.

Leave A Comment