KATHMANDU, May 15: Stock analysts say that the result of the local level polls will direct the market's future course.
Though stock investors did not seem buoyant over the polls like in previous elections, analysts say that the election results and future political development will decide the future course of the market.
Nepal Stock Exchange (Nepse) index has logged gains of only 46 points from mid-April since the election fever gripped the country. The benchmark index closed at 1,658.58 points on Thursday.
While political developments generally affect the stock market, the local level polls did not weigh on stock prices this time, according to investors. While investors were bullish over the local level polls, the tightening of bank financing and liquidity crunch reined in share prices, they say.
“There was a kind of uncertainty over the election until last week. So, investors were reacting based on political developments,” said Anjan Raj Poudyal, former president of Stock Brokers Association of Nepal (SBAN). “The market remained fairly stable on the election eve. However, the direction of the market will depend on the fate of the second phase of polls scheduled for June 14 and which party emerges victorious in the first phase,” he added.
While the political stability after the successful local level polls is also expected to boost the market, the spending during the election will also pump more money into the banking system, say analysts.
Facing shortage of lendable funds, bank and financial institutions (BFIs) have been tightening credits toward stock market. Tightening of credits and rising interest rates have sent stocks down in recent months. After reaching to as high as 1,881.45 points in June last year, the stock market has started to take a dip.
Dipendra Agrawal, an investor, told Republica that he believes the stock market will take a new height after the election. “The election has boosted the confidence of investors. However, share prices did not rise as the interest rate was rising and investors were facing liquidity crunch to buy stocks,” Agrawal, who is also an executive member of Nepal Investors' Forum, said. “The election means spending from the government as well as candidates. This spending will pump money into the banking system, providing banks more liquidity. Similarly, the government's development expenditure will also rise in the fourth quarter. The combination of development expenditure and election spending will take the stock market to a new height,” he added.
Some analysts say that they see the possibility of market climbing up in the lead up to the second phase polls scheduled for next month when their will be ample liquidity in the market.