Print Edition - 2014-07-08 | MONEY
Stock market near 1,000-point mark
- Nepse closes at six-year high of 995.19 points on Monday
Jul 7, 2014-
Nepal Stock Exchange (Nepse) on Monday rallied to a six-year high, marching towards the 1,000-point mark. The benchmark index, which had last breached the 1,000-point mark on July 29, 2008, closed at 995.19 points on Monday.
Amid strong buying pressure in the market, experts predict, the index, by the start of the new fiscal year, could surpass its all-time high of 1,175 points. Nepse had hit its peak on August 31, 2008 before plunging to its lowest of 292.31 points on June 15, 2011.
The index has been on a bull run following the second Constituent Assembly election and the formation of the new government. In the last five months after the formation of the Sushil Koirala-led government, Nepse has surged by around 200 points.
Over the last year, the Nepse index has more than doubled. On July 7, 2013, the index was at 494.45 points. The insurance companies’ group has been the largest gainer. The sub-index closed at 4,513.19 points on Monday, which was at 888.48 points on July 7, 2013.
The hydropower sub-index also rose almost three-fold to 3,020.45 from 1,027.30 points over the period. Hotels surged to 1,890.82 points from 668.90 points, while commercial banks saw their sub-index escalate to 886.86 from 486.94 points.
Stock analysts attribute rise to surplus liquidity in banks and financial institutions (BFIs), declining interest rates on deposits, end of the fiscal year, and improved political situation, among others.
Chiranjeevi Nepal, economic advisor to the Prime Minister, views the stock market as a “normal phenomenon” amid growing number of investors. “Then years ago, the daily average transaction used to be just Rs 100 million, which has now surged to Rs 360 million. The rise in volume has also pushed the index up,” said Nepal, who is also former chairman of the Securities Board of Nepal (Sebon).
Nepal said Nepse could surpass its record of 1,175 with the beginning of the next fiscal year. “As almost all economic indicators are now in positive direction with a stable government in place, Nepse could breach its all-time high of 1,175 points,” said Nepal, hinting the new budget could bring some measures in favour of capital market.
Sebon Spokesperson Niraj Giri echoed Nepal. “Increased attraction of individual investors, introduction of institutional investors and possibility of new budget addressing some of the issues related to the capital market have contributed to the growth,” he said.
Giri however, expressed concern about the “abnormal” rise in the index of insurance companies. “Amid growing concerns about whether the sector is overpriced, we are closely observing the trading,” he said.
Pralhad Kumar Oli, managing director at Pragyan Securities, said: “As the capital market has been offering lucrative returns over the last year, a large number of new investors have come to the market,” he said.
Oli, however, said the market is still volatile as most of the investors are interested in short-term investment. “A large number of investors mostly book profits even with small margins,” said Oli, adding the government needs to bring policies to provide incentives for investors who invest for a longer period.
Published: 08-07-2014 09:32