Investors Lose Over NPR 450 Billion in One Week: Can the Market Decline Be Halted?
Summary: Since the formation of the new government, the Nepalese stock market (NEPSE) has dropped by 9.59% (284 points) to reach 2,676 points. Crackdowns on major businessmen under asset purification investigations have affected market sentiment. Investors are pressuring the government to implement reforms in the capital market.
Kathmandu, Chaitra 22: The stock market has been unsettled following the establishment of the new government, with NEPSE declining by 9.59% (284 points) within just one week. During this period, the market value of investor assets has fallen by approximately NPR 450 billion. Before the government was formed, NEPSE stood at 2,960 points. After the decline that began last Sunday, NEPSE has dropped to 2,676 points. Previously, total market capitalization was NPR 5 trillion, which has now decreased to NPR 4.55 trillion.
On Sunday alone, the NEPSE index decreased by 3.79% (105 points). The significant market downturn has caused concern across political parties. Many investors have been forced to sell shares at heavy losses. The principal cause of the decline is ongoing government crackdowns on businesspersons. Some have had assets frozen while others have been arrested, impacting market psychology.
Former President of the Stock Brokers’ Association of Nepal, Narendra Sijapat, stated, “The crackdown on major businessmen due to asset purification investigations has caused others to become fearful.” He added, “Large businessmen hold substantial amounts of shares, and their increased selling may be behind the market decline.” While asset purification investigations are routine state affairs, he noted it is inappropriate to spread excessive panic and rumors purely because of them. According to Sijapat, the market drop is based on psychological factors, and declining prices push other investors to sell as well.
The government is not against the stock market but is focused on promoting good governance, he emphasized. Finance Minister Dr. Swarnim Wagle has expressed the government’s commitment to making the capital market transparent and well-governed, though market stabilization has not yet been achieved.
Association Chairman Sagar Dhakal also confirmed that rumors of government targeting major investors under asset purification investigations have spread fear. He said, “This fear will not last long. Market declines should not occur simply because of law enforcement, but psychological effects have caused an unnatural drop.” Dhakal insisted the market will not fall drastically and predicted, “It will begin to recover within a few days.” He urged the government to build investor confidence and accelerate reforms in the capital market.
One brokerage operator noted that the buying side has weakened, preventing the market from stabilizing. He remarked, “Fears of government crackdowns on major investors have caused panic, with concerns that the NEPSE could drop as low as 1,800 points.” Highlighting that regulatory bodies have not sufficiently reassured investors and traders, Securities Board Chairman Santosh Narayan Shrestha said, “Alongside asset purification, the board is focused on strengthening investor confidence.” He mentioned that the government has instructed authorities to speed up capital market reforms.
A broker operator explained that since share sale proceeds are directly deposited into investors’ bank accounts and purchases occur through banking channels, the possibility of laundering illicit funds through shares is minimal. He added, “If illegal assets are in the bank, they get frozen; if invested in shares or real estate, freezes are imposed there too.”
Tulsi Ram Dhakal, President of the Nepal Investors Forum, stated that rumors following the arrest of businessmen have dampened investor morale. He said, “The market should not decline so sharply merely because of inquiries related to asset purification. The stock market operates through the banking system; there are no cash transactions.” He further stated that no other factors are currently pushing the market down besides the crackdown. “Interest rates are low, investment options limited, policy reforms are underway, margin trading will begin from Baisakh (mid-April), and currency reserves and other indicators are strong,” said Dhakal. “Although the market dropped sharply over a short time, it is likely to recover at a similar pace soon.”
Some investors have staged protests, accusing the government of failing to implement necessary capital market reforms and not reassuring the public. The investor group demonstrated near the South Gate of Singha Durbar. Participant Tilak Koirala said, “If illegal acquisition or financial irregularities occur, action should be taken, but it is unacceptable that the market continuously falls without reforms.” He pledged to pressure authorities to accelerate capital market improvements. Koirala underlined the need for significant upgrades to stock market technology and systems and urged the government to deliver positive signals for the market.