Nepse imposes circuit breaker to halt trading and caution investors amid volatility
UPDATE: The Nepse benchmark index plunged 58.46 points, or 3.53 percent, to close at 1,599.62 points. The market remained volatile thorough out the trading day as panicked investors, with no apparent reasons, scrambled to offload their shares.
KATHMANDU, Nov 20: Nepal Stock Exchange (Nepse) benchmark index nosedived 44.53 points on Sunday (as of 2:35 pm) as the market observed excessive selling pressure of stocks.
After the benchmark index plunged by four percent before two hours of the trading, Nepse imposed a circuit breaker to halt the trading of stocks.
Analysts say that the free fall in the market signals a bearish trend ahead after a bull run of stocks for nearly three years.
Nepse imposed circuit breakers in the market when there is excessive volatility in the market as a symbolic way to suggest investors to become careful about their investment decision in the volatile market.
“There has been extreme selling pressure in the market as investors want to get rid of their shares in the market that has been in a downfall since last couple of days,” says Anjan Raj Poudyal, former president of Stock Brokers Association of Nepal (SBAN).
The stock market was halted for trading at 12:37 pm for half hours after the circuit breaker was enforced. The market was opened for trading at 1:07 pm.
The stock market, which was in a downward course as soon as the market opened, however, recovered to some levels in the mid-day . But, the recovery didn't last long as benchmark index continued diving in the end of trading hour.
As bank and financial institutions have tightened their funds toward stock market after the banking industry starts facing liquidity (loan-able fund) position crunch, the stock market investors are feeling the pinch.
“The interest rates of the banks are going up and they are tightening their credits toward stock market as they don’t have liquidity surplus anymore. The tightening of fund is hampering the market,” he added.
He also said that the ban on the Indian currency of 1,000 and 500 denominations has also hit many stock market investors.
“Many of the investors used to have stocks of the Indian cash. After the ban on the currency, they have to find cash somewhere else to make investment in their businesses, depressing the demand of shares in the market,” he added.
However, there are some investors who think that there is no any reason for the free fall.
“Listed companies are making impressive performance. The government is opening the market for the nonresident Nepalis to invest in the stock market. These all factors should make the investors upbeat,” Dipendra Agrawal, an investor said.