Nepal Stock Exchange (Nepse) ended the year 2016 on a high note, with the benchmark index rising 292 points, or 25.36 percent, to close at 1,443.38 points.

Over the past year, investors recorded gains worth Rs393.07 billion.

Last year, the capital market remained one of the most lucrative sectors for investors

amid falling bank interest rates due to excess liquidity in the banking system, full implementation of paperless share transaction system, and capital growth plans adopted by a number of companies, including banks and financial institutions (BFIs).

Besides a few cases of panic buying and selling, investors seemed more mature and acted sensibly, resulting in relatively low fluctuations compared to previous years, according to stockbrokers.

The market that opened at 1,151.38 points on January 3, 2016, continued to escalate to close at 1,212 points on January 17. It was the first time Nepse had reached the levels, breaking previous record of 1,200.92 points recorded on August 21, 2015. With an encouraging demand for shares driven by attractive dividends offered by a number of companies, the market closed at its life-time high of 1,881.45 points on July 27.

Anjan Raj Poudel, managing director of Thrive Brokerage House, attributed the surge to the enforcement demat system, which Nepse made mandatory from mid-January last year. “After the demat system made the transaction and settlement processes easier, many new and small investors were attracted towards the stock market, taking the market to new heights,” Poudel said.

He said the fall in bank interest rates as a result of excess liquidity also contributed to Nepse’s surge. “Also, the market was able to attract investors who had not been able to, or were reluctant to, invest in other sectors in the aftermath of the four-and-a-half-month Indian blockade,” he said.

The transaction amount also scaled new heights last year. The market, which used to see single-day transaction of around Rs500 million, posted more than Rs1 billion in daily transaction for the first time on March 16. And, the figure hit its all-time high of Rs2.75 billion on July 16.

With rise in the index, the overall market capitalisation escalated to Rs1,615.75 billion from Rs1,222.68 billion over the period under review. The sensitive index also posted

65.1-point gain.

Of the nine sub-groups, seven posted gains. The group representing insurance companies (up 1,467.74 points) led the gainers’ side. The insurance sub-index had once crossed the 10,000-point mark, but it could not sustain the gains and closed the year at 6,786.04 points. “Due to uncertainty over capital hike plan, stocks prices of insurance companies have fallen,” said Poudel. Development banks gained 438.13 points to close at 1,522 points, while commercial banks rose 319.03 points, hotels 180.57 points and finance companies 121.47 points. The groups representing hydropower companies and others, however, lost 212.19 points and 40.11 points, respectively.

After an encouraging first half, the market followed a bearish trend in the later part of the year. Nepse dropped more than 200 points in the month of December alone, amid increased selling pressure and low demand, rising bank interest rates, political impasse, and companies performing book-close. The average daily transaction also fell heavily to just Rs500 million.

Poudel, however, hoped the New Year to be more encouraging. “Nepse is likely to

introduce full automation system in stock trading and allow Non-Resident Nepalis to invest in the secondary market. Also, Nepse has allowed stockbrokers to operate remote workstations in locations outside the Valley. These positive steps could take Nepse to new heights in the next year,” he said.

GAINS

    2016 opening    2016 closing    Change

Index     1151.38    1443.38    292

Market cap (in billion)    1,222.68    1,615.75    393.07

Sensitive index    246.54    311.64    65.1

SUB-INDICES

    2016 opening    2016 closing    Change

Commercial banks    1046.05    1365.08    319.03

Dev banks    1083.87    1522    438.13

Finance    574.28    695.75    121.47

Hotels    1704.66    1885.23    180.57

Hydropower    1922.53    1710.34    -212.19

Insurance    5318.3    6786.04    1467.74

Manufacturing    1859.08    NA    

Trading     207.97    NA    

Others    769.51    729.4    -40.11

MILESTONES

17-Jan-16: Nepse closes at 1212 points, breaking previous record of 1200.92 points

27-Jul-16: Hits lifetime-high of 1881.45 points

14-Mar-16: Single-day transaction crosses Rs1-billion mark for the first time

26-Jul-16: Record-high single-day transaction of Rs2.75 billion