The benchmark index, which opened at 520.91 points on Sunday, shed 6.6 points, or 1.27 percent, over the week to close at 514.31 points on Thursday, the last trading day of the week, as all sub-indices, except insurance and trading, took a dip.[break]
“The stocks took a beating this week as financial institutions these days are not showing as much interest in extending margin loans to purchase shares due to volatility seen in the stock market,” Anjan Poudel, a stock broker, told Republica.
One of the reasons why the stock market remained upbeat from the end of October till the end of December was rise in flow of margin loans - credit extended to stock investors against guarantee extended by stockbrokers - especially from development banks and finance companies.
“But as political problems, like dispute between ruling and opposition parties over formation of a national consensus government dampened investor confidence, many financial institutions stopped showing enthusiasm of the past,” Poudel said.
The decision taken by financial institutions to cut credit flow to the stock market has drastically lowered trading activities in the stock market.
Over the week, shares worth Rs 347.56 million were traded on the domestic bourse, down 11.06 percent from previous week´s Rs 390.77 million.
The trading amount recorded in the past two weeks is sharply lower than share transaction of Rs 758.59 million registered in one-week period to December 20 and Rs 735.53 million recorded in one-week period to December 27.
“If political uncertainty persists for some time, stocks may further lose their value, eroding gains made since the end of October,” Poudel said.
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