NEPSE Lost Nearly 200 Points in the Last 6 Trading Days: Market Summary with Experts Speak

The NEPSE index lost 79.74 points on a highly volatile day today and closed at 2,474.39. The index opened at 2,557.79 and briefly made an intraday high at 2,559.43. The index lost in intraday action today, going as low as 2,474.15. With this, total volatility of 85.28 points was observed in the trading session today.

16,017,322 shares traded hands via 96,151 transactions. The trading of 207 scrips brought the total market turnover to a little over Rs. 8.35 Arba.

While the float index lost 5.52 points and closed at 170.52, the Sensitive index is at 447.29 after losing 14.53 points.

Shikhar Insurance Company Limited (SICL) has the highest individual scrip turnover of a little over Rs. 1.02 Arba. The shares of Nepal Infrastructure Bank Limited (NIFRA) traded the most.

Chandragiri Hills Limited (CGH) has technically hit the 10% positive circuit today. Meanwhile, Ganapati Laghubitta Bittiya Sanstha Limited (GMFBS) has lost the most 7%, followed by Nepal Finance Limited (NFS) which lost 6.74%.

Only the Hotels and Tourism sector gained a minimal 0.54% today. Among all other sectors that lost, Investment lost the most 4.13%.

Experts Speak

Sharesansar as an entity stays away from providing a market opinion. However, we occasionally knock on the doors of experts to listen to what they have to say about the market's movement. Like always, we have collected the personal opinions of an expert about NEPSE's recent correction.

Although our interviewee is a credible source of information, reader discretion is advised. Take your own financial decisions.

Hemanta Bashyal

+ Studied Financial Risk Management at Global Association of Risk Professionals
+ Studied Chartered Financial Analyst (CFA) at CFA Institute, USA

Bashyal thinks the cause for the correction can be boiled down to four major reasons:

a) Soaking up of the liquidity that was in excess at the start of the bull phase.

Immediately after the pandemic caused economic activities and spending to a complete halt, liquidity began to pile up in banks and financial institutions. Excess liquidity is as bad as a liquidity crisis, but it sure did push the NEPSE index to higher highs. When there were seemingly no investment opportunities during the pandemic, Nepal's only stock exchange was open and breaking previous records. This led to a domino effect in which the index gain secured further investment and further investment secured sustained index gain.

However, the excess liquidity seems to have been curbed. If the liquidity condition isn't improved, it is at least not as bad as during the pandemic. The stats in the Balance of Payments (BOP) and the timing of the fiscal year are in part responsible for the soaking up of the liquidity.

b) Fiscal cycle and the shadow economy

A lot of investment flows outside of Nepal, regardless of whether you believe in it or not. This can happen both in the form of under-invoicing and over-invoicing. A significant amount of capital transaction is done every month that is not tracked by the government's books.

Furthermore, the government and its certain way of operating have also prevented liquidity from being circulated in the economy, whether we talk about the government's management of T-bills, fiscal revenue, or consumer imports and capital expenditure.

c) Uncertainty created among investors by the nation's political instability

The government is the biggest entity of a nation. If compared to a company, it seems that the management is not at peace with itself.

Recent political scenarios have caught businessmen and investors off-guard. What will happen to the country's political scenario is anyone's best guess. Needless to say, concerned investors hold their wallets tight.

d) Profit booking by the early birds

From the start of the bull run, the NEPSE index has gained about 130%. For an ideal investor who got in at the exact beginning of this ride, the returns are extraordinary, in any financial market of the world. For those who entered comparatively early (and not necessarily at the very beginning), this is a reasonable time to book the profit.

And it seems that investors are doing exactly that. Daily volume in the index is at its higher level. This not only means that investors are buying, but it also means that some are selling, and they are selling hard.

Wrapping Up

Bashyal is of the opinion that the crunch in the liquidity is only a corrective move and it is unable to bring about a major market move in itself. Also, looking at all the constraints, he does not see the possibility of interest rates going up anytime soon. At best, the recent change in liquidity scenario and volatility is only temporary.