The last time the Nepse had soared to such heights was on August 27, 2009 when it reached 708.75 points. Since then, the stock market had been on a continuous downturn until the jinx was broken by the announcement of the election.
News of the polls reinvigorated the stock exchange, and the publication of the results fuelled the bull run as parties seen as being market friendly grabbed most of the votes. The Nepse has gained more than 100 points in the last two weeks.
On Wednesday, the Nepal Stock Exchange had to halt trading twice as the index broke the speed limit. A suspension in trading known as the circuit breaker is applied when the index fluctuates greatly. Trading is stopped for a while when the index changes by 3 to 4 percent, and for the entire day when it changes by 5 percent.
Stock analysts said that the bullish trend appeared in the stock market particularly due to political reasons. They said that the emergence of market friendly political parties as major forces also increased the confidence of investors.
Besides political factors, the availability of adequate liquidity with banks and financial institutions also helped as investors could get loans easily and at cheaper rates. The increased turnover and the number of shares traded also suggest that confidence has grown among investors to put their money in stocks.
“The increased volume of transactions suggests that investors are considering the gain to be sustainable,” said Anjan Raj Paudel of Thrive Brokerage. The stock exchange registered a turnover of Rs 523.33 million from the trading of 1,308,922 shares on Wednesday. The secondary market had witnessed double-digit growth on Tuesday too with a turnover of Rs 515.81 million. “Although the market has been overpriced in a short time period, the increased volume of transactions has helped the market to grow,” Paudel added.
However, he urged potential investors to be cautious as the index has reached too high too soon. “In addition to surging stock prices, they have to take into account whether the companies whose shares they are buying can offer good returns or not.”
Similarly, Pralhad Kumar Oli, managing director at Pragyan Securities, said that investors could minimise their risks if they assess the companies’ performance properly even though their share prices may be rising.
“Although many investors have already started booking their profits, a large number of investors have been encouraged to make investments due
to the continuing upswing of the Nepse,” he said. “This has led to a huge turnover.”
According to Oli, investors from outside the Kathmandu valley have also been buying stocks with greater vigour in recent days. There are Nepse work stations in Biratnagar, Birgunj and Chitwan. Earlier, trading from outside the valley was very small which forced many stockbrokers to discontinue their service.
Meanwhile, five trading groups including hydropower, insurance, banking, development bank and others secured double-digit gains during Wednesday’s trading. The hydropower group gained the highest 53.09 points.
NMB Bank witnessed the largest turnover of Rs 37.74 million. It was followed by Chilime Hydropower and Nepal Bank. Sagarmatha Insurance and Supreme Development Bank witnessed the largest gains of 10 points each. Stockbrokers said the secondary market could grow further if the improvement in the political scenario continues. “If investors find that the government which is formed is friendly to the stock market, the Nepse could cross 900 points this year,” said Oli.
The Nepse reached an all-time high of 1175.38 points in August 2008. It sank to a record low of 292.32 points on June 15, 2011.
- Kantipur
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