Capital market ends fiscal year in buoyant mood

Capital market ends fiscal year in buoyant mood

Jul 16, 2014-

The capital market ended the fiscal year 2013-14 on a high note with the Nepal Stock Exchange (Nepse) index reaching 1,036.11 points on Wednesday. The index has increased more than two-fold over the last one year thanks to positive political developments in the country like the Constituent Assembly (CA) election and the formation of a market-friendly government.

At the end of the previous fiscal year on July 16, 2013, the Nepse was wallowing at around 509.36 points. On July 8, the market crossed the 1,000 point mark for the first time in six years.

Looking at the trend of the capital market over the last six years, there was a disappointing stage when the market had dwindled to as low as 292.31 points on June 15, 2011.

With the surge in the index, the market capitalisation which measures the total prices of listed stocks also doubled to Rs 1,057.16 billion. Besides positive political developments, high liquidity with banks, a fall in interest rates on deposits, easy availability of loans against shares, a fall in interest rates on margin lending and an increase in investments by institutional investors contributed to the growth of the capital market, said analysts.

Narendra Raj Sijapati, president of the Nepal Stockbrokers’ Association, said that lack of an investment-friendly environment in the productive sector despite a surge in liquidity with banks and financial institutions helped investors to get easy loans to invest in the share market.

Initially, during the early part of fiscal 2013-14, the market followed an upward trajectory after the government announced the date of the CA election for Nov 19.

Following the CA election, the Nepse shot up by almost 200 points in just two months. The index started to leap after the Sushil Koirala-led government was formed on Feb 10. In just last five months after the formation of the government, the index had escalated by more than 250 points.

Unlike in the past when the share prices of banks and financial institutions used to influence the Nepse, a massive rise in the index of insurance companies and the hydropower sector contributed heavily to the capital market this year. The biggest growth was witnessed in insurance stock. The group’s index surged to 4,383.36 points from 941.56 points in one year. Similarly, the indices of hydropower and hotels also surged almost three-fold to 3,052.49 points and 1,889.82 points respectively.

Sijapati said that investors were mainly working to diversify their investment portfolios in recent days that has resulted in a rise in the indices of other sub-groups. He attributed the rise in the insurance index to rumours that these companies would have to increase their paid-up capital. “In addition, the good returns offered by these companies were also among the reasons.” Niraj Giri, spokesperson of the Securities Board of Nepal (Sebon), termed the rise in share prices of insurance companies abnormal. According to him, high demand along with the low quantity of insurance shares compared to those of other similar companies helped the group’s index to go up.  

However, shares prices of commercial banks did not rise as expected over the period, said stockbrokers. They said that the group’s shares transaction had been affected mainly due to Sebon’s mandatory provision to convert 19 percent of the promoter shares into general shares. “Due to a possible surge in the supply of shares that would drag down prices, the sentiments of investors were affected,” said Sijapati.  

Along with the Nepse index, the turnover has also increased of late. The market that used to see a turnover of less than Rs 250 million daily now sees transactions of Rs 450 million daily, said stockbrokers. On Wednesday, the transaction amount shot up to Rs 644.95 million.

Anjan Raj Paudel of Thrive Brokerage House attributed the rise to the increasing maturity of investors. “Compared to the past, investors now do not show any hurry to book their profits when the market plunges on a particular day,” said Paudel, adding that increased investments by institutional investors along with a significant rise in the number of investors from outside the valley had helped the turnover to grow.

Stockbrokers have expressed hope that the Nepse will breach the record index of 1,175 points reached on August 31, 2008 in the new fiscal year.

In bullish trend (indices in points)

Headings                            July 16, 2013    July 16, 2014

Nepse Index                                509.36             1036.11

Market Capitalisation    Rs 505.63 billion    Rs 1,057.16 billion

Insurance Companies             941.56               4,383.36

Hydropower Companies      1,061.89               3,052.49

Hotels                                          659.31               1,889.82

Commercial Banks                   505.01                  945

Development Banks                 257.06                   683.42

Finance Companies                 252.85                  504.88

Manufacturing                             868.72               1,138.28

Trading                                        169.36                   188.5

Others                                          636.79                   770.69

Published: 17-07-2014 09:08

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