August 16, 2016 12:40 AM NPT
Rs 43 billion wiped off the market on Monday alone
KATHMANDU, Aug 16: Nepal Stock Exchange (Nepse) index tanked 39.12 points, or 2.26 percent, on Monday to close at 1,694.81 points, indicating that the market recovery that started last week could be already losing steam.
The stock market had rebounded last week, gaining 103 points, following a steep downfall in the beginning of the week. However, Monday's rout wiped Rs 43.12 billion off the market.
Stock analysts say that the market has taken a correction course, following a long bull run for more than a year. Despite drop of 80.03 points in the last three trading days, the benchmark index is still 583 points higher than what it was on this very day a year ago.
The market downfall coincides with the Maoists rise to power. The market had gone into red soon after it was confirmed that CPN (Maoist Center) supremo Pushpa Kamal Dahal was becoming the new Prime Minister of the country in the first week of the August. The market had bounced back after Minister of Finance, Krishna Bahadur Mahara assured investors that the government was committed toward development of capital market.
The decision of Securities Board of Nepal (Sebon) to scrap a committee to probe flow of black money into the stock market had also helped the market to regain its momentum. Many analysts believe that the formation of the committee had pushed the market down, fuelling concerns that the stock market was receiving a large amount of dirty money. All these factors have a combined effect in unnerving investors, say analysts.
The sudden slump was mainly due to sell-off by panicked investors, according to analysts. "Bank and financial institutions, who dominate the stock market, are publishing financial results that show they are making impressive profits. There has not been any change in the macroeconomic fundamentals. Still the market is going down," Praveen Raman Parajuli, president of Nepal Merchant Bankers Association, said. "A certain level of correction is essential for the market stabilization. However, the huge correction is mainly due to panic selling by retail investors," he added.
The lower the market goes, the more the retail investors rush to dump their shares. "Retail investors become panicked fast even if there is some minor correction as they cannot hold their shares for a long term," added Parajuli.
A total of 19 listed companies, including Nepal Telecom and Agricultural Development Bank Ltd, saw their share prices go up despite heavy fall on Monday. All trading groups ended in the red zone. A total of 2.42 million units of shares of 141 companies worth Rs 1.2 billion changed hands in the market this week through 6,641 transactions.
Meanwhile, Share Investors Forum has urged investors to maintain restrain and patience while making investment in the secondary market.