Nepal’s Stock Market Journey: From Post-Election Rally to Falling Confidence

Nepal’s stock market sentiment has been a roller coaster over the past half-year, peaking immediately after the general election and then correcting sharply amid reduced trading volumes, arrests of key figures, investigations, and investor confidence in the market. By the end of September, optimism that sent the market surging sharply higher immediately after the election had vanished.

The NEPSE jumped 162.93 or 6 percent to close at 2,875.43 on March 9, 2026, after hitting all three positive circuit breakers on the day as traders snapped up shares in expectation of economic growth after the election. The NEPSE had closed at 2,712.49 points on March 3, 2026, and climbed to 2,875.43 on March 9, jumping 162.93 points or 6 percent. The market jumped 4 percent in the first hour, 5 percent in the second, and 6 percent later in the day before closing.

The rally was driven by expectations of political stability and a new economic direction following the election. The Rastriya Swatantra Party secured 125 of the 165 first-past-the-post seats, creating expectations of a strong government with the capacity to introduce policy and institutional reforms.

The bullish run in the share market, however, was short-lived as the NEPSE fell 32.08 points to 2,843.35 on March 10, 2026. It then rebounded strongly on March 26, 2026, closing at 2,950.16 points. This was the level to which the NEPSE regained just before Prime Minister Balendra Shah took office on March 27, 2026. NEPSE fell by 71.05 points on March 29 and 47.71 points on March 30, 2026. The market continued its slide, recording a drop of 105.50 points on 5th April 2026.

The sharp correction showed that the election rally had been largely based on expectations. Once the government was formed, investors began evaluating actual policies, liquidity, earnings, regulation, and the broader business environment rather than simply pricing in political change.

Not only the index but also market value dropped significantly during the period.

The total market value of Nepal’s stock market declined from around Rs. 5.009 trillion as of March 26 to around Rs. 4.416 trillion as of July 13, 2026. During the period, the NEPSE also dropped more than 380 points, from 2,950.16 to 2,570.28 points. The market continued to decline, hitting 2,613.33 points on September 28 and 2,598.89 points on September 30, 2026. It closed at 2,587.25 points on October 2, 2026. The index was down more than 360 points compared to where it was in early March, when Balendra Shah took office.

The trading pattern also changed. The market moved from the high-turnover, high-expectation environment seen around the election to a more cautious phase in which investors increasingly preferred to wait rather than commit fresh capital.

The most surprising lesson about Nepal’s capital market in the past six months is how quickly investor confidence was damaged after the new government was formed.

The bullish run recorded immediately after the election demonstrated that investors were quick to believe that the election results would bring stability to the country and, by extension, the capital market. They were, however, just as quick to realize that the situation had not changed substantially after the new government was formed.

According to an analysis by The Kathmandu Post in July 2026, in the first 106 days of the new government, the NEPSE fell on 47 of the 73 trading days and rose on 26 days. In addition, the analysis noted that trading volumes were on average Rs. 13 billion per day before the new government was formed, compared to only Rs. 5.6 billion per day in the same period after the government was formed. Similarly, capital-gains tax collections from the capital market also dropped from Rs. 15.306 billion in the first 11 months of the fiscal year ended July 2025 to only Rs. 9.64 billion in the first 11 months of the fiscal year ended July 2026, a drop of about 37 percent.

Investor confidence was also dented by controversies that erupted around key figures in the new government, including the arrest of former Prime Minister KP Sharma Oli and former home minister Ramesh Lekhak in March 2026 over allegations of involvement in the September 2025 Gen Z protests and later their release after they agreed to cooperate with the investigation.

The market became even more jittery when several businesspeople were investigated and arrested over allegations of securities fraud, insurance fraud, and money laundering. Shekhar Golchha was arrested in April 2026 in relation to investigations into alleged share price rigging and later released on a Supreme Court order after his lawyers challenged his detention, but was arrested again in connection with another investigation. Similarly, businessmen Deepak Bhatta and Sulav Agrawal were arrested and investigated in relation to allegations of share price rigging and money laundering.

Investigators recommended prosecution in a money-laundering case involving 29 people and transactions worth almost Rs20 billion. Former finance minister Bishnu Poudel was also arrested in relation to a money-laundering case involving the Bhatta case in June 2026. These are allegations, and these people have been investigated and could still be prosecuted.

For the capital market, the implications of these investigations are significant, as many of those investigated and arrested are major players in the business world. Their detention and investigations have created uncertainty in the market at a time when businesses need stability to grow. Market players have repeatedly cited fears around investigations as a reason why major investors have remained on the sidelines, waiting for more clarity.

Some positive changes have taken place in Nepal’s capital market in the past six months, despite the overall negative story around the NEPSE. For example, more companies have been listed on the stock exchange, although the market remains heavily weighted towards the banking, financial, insurance, and hydropower sectors. The market has undergone a significant correction in valuation, liquidity, and confidence.

In addition, market infrastructure was also tested when trading was suspended on September 21, 2026, after a ransomware cyberattack disabled NEPSE’s data hub and trading systems. A five-member committee was formed to probe the incident and come up with recommendations to avert such attacks in the future. This happened at a time when the government was embarking on measures to facilitate more advanced trading facilities.

The attack, therefore, raised questions about the readiness of Nepal’s capital market to embrace technological innovations such as intraday trading, derivatives, and other related products. Experts argue that developing new market products requires adequate technology and cybersecurity infrastructure to ensure reliability.

Despite the market’s challenges, Nepal’s government has not been idle in terms of reform. The FY2026 budget proposed restructuring the NEPSE and introducing intraday trading while also considering short selling and derivatives. The government has since proposed a 21-point Capital Market Strengthening and Revival Action Plan which covers a wide range of issues including restructuring NEPSE, introducing a new benchmark index, developing the bond and money markets, boosting institutional investments, building a framework for margin lending, intraday trading, securities lending and borrowing, and short selling. The plan also proposes opening up the secondary market to non-resident Nepalis and changing the capital-gains tax structure to encourage long-dated investments.

In addition, the government has proposed institutional and legal reforms to SEBON, NEPSE, and CDS and Clearing while also requesting the parliamentary Finance Committee to take action on issues concerning improved cybersecurity, institutional arrangements, and actions against market abuses including cornering, circular trading, and pump-and-dump activities. These proposals, if fully implemented, will have a significant impact on Nepal’s capital market.

However, most of these proposed changes are yet to be implemented and will require policy changes, regulatory approvals, time, and resources before they can be realised and have an impact on the capital market.

What, then, is the story behind Nepal’s stock market over the past six months? Apart from the sharp decline in the share price following the election rally, the biggest lesson is the loss of confidence in the market’s ability to provide a stable, reliable, and attractive investment environment.

The market witnessed one of its strongest rallies in the recent past immediately after the general election, peaking at 2,950 points before sharply correcting. It also recorded a significant drop in market value, trading volumes, and liquidity, as well as a wave of investigations into key individuals and businesses, and a cyberattack that caused significant disruptions and reduced confidence in the market. At the same time, the government has proposed significant reforms to Nepal’s capital market with the long-term goal of positioning it as a major financial centre in the region.

The key question to watch out for in the months to come is whether these proposed reforms will be implemented soon enough to boost liquidity, trading volumes, attract institutional investors, increase market infrastructure, and confidence in the capital market. Six months later, the market still has high hopes that the promised reforms will enable it to deliver on its potential as a dynamic and reliable investment destination.