The capital market regulator has already issued two statements in three weeks, urging investors to take caution while making investment in the stock market.The benchmark index has amassed 416 points, or recorded a growth of 43 percent, in last eight months to close at record high of 1,377.33 points on Sunday.
Issuing a public notice on Monday, Sebon said that the rise of the stock market should be taken 'cautiously'.
Sebon's statement has come at a time when the stock market is in the upward trend for the past seven months. Many experts doubt sustainability of current Nepse rally.
"Sebon thinks that the stock market is inconsistent with the macro-economic fundamentals of the country. The market is largely driven by speculations," Niraj Giri, executive director of Sebon, said. "Our reading is that many people are investing in the bullish market in a way that they will miss the bus if they do not board it now. That is why we have asked them to be aware of the risks in the market and make investment so that they do not need to regret later after losing everything."
Sebon, in its statement, said that it has become 'sensitive' with the stock market's continuous rise despite downward revision of economic growth rate to 2 percent for the current fiscal year and not-so-much satisfactory performance of the listed companies in the wake of recent devastating earthquakes and Tarai-Madhesh agitation.
While Sebon contends that some of the reform measures initiated by it have made the rally somehow justifiable, it said that the growth of the market while considering the economic outlook of the country and financial situation of the listed companies, among other indicators, should be taken with a pinch of salt.
However, the senior Sebon official ruled out any manipulation in the stock market. "We would have stepped in and take needful action if it were market manipulation. The spectacular growth in the market is largely due to speculations. That is why we are urging investors, particularly the new and retail investors, not to run after rumors and speculations," he added.
However, many analysts term the capital market regulator's move to 'caution' investors as a mere formality to 'show that it has done its duty'. "The market is rising at an exponential rate for the past seven months. Why did not the regulator think it necessary to raise its voice if it's assessment of the bullish run is fuelled by speculations?" questioned an executive of an investment firm, requesting anonymity as he believes his comment could jeopardize his relationship with the regulator.
However, Giri, who is also the spokesperson of Sebon, said that the board has been frequently cautioning investors to make informed investment judgment.
For many experts, the current rally, however, is a genuine one. "It is not all about speculations only. There would not be a daily turnover of around Rs 800 million if speculation was the only determinant of the market rally," Ambika Prasad Paudel, managing director of Hathway Investment Nepal Ltd, said. "Tactful investors can weather any downturn in the market which is also a part of the market cycle. It is obvious for investors to pour their savings in the stocks of companies which have better return than the interest rates offered by banks," he added.
Sebon would like to see Nepse at 1,100 to 1,200 points
Securities Board of Nepal (Sebon) would like to see Nepal Stock Exchange (Nepse) index in range of 1,100 to 1,200 points at present market conditions.
A high-level official of Sebon, asking not to be named, told Republica that the capital market regulator's understanding is that the benchmark index at 1,100 to 1,200 points would be a better reflection of the true picture of the economy in the current scenario.
Sebon issued two statements in three weeks with a hope to bring the market to its desired level. "Both the rise of the market to an unusually high level and a plunge to the lowest level worries the regulator," said share market researcher Gopal Prasad Bhatta. "The market has indicated that it will go up further instead of retreating from the peak, prompting Sebon to issue statements, urging investors to deal cautiously," he added.
Related story
As stock market records new highs, Sebon urges investors to tre...
