Nepse reverses early gains after budget

KATHMANDU, JUL 15 - The Nepal Stock Exchange (Nepse) plunged 8.04 points on Monday reversing Sunday’s 13.51-point jump as the initial euphoria triggered by the announcement of the budget turned out to be misplaced since it offered nothing new to the capital market.

The Nepse closed at 1,028.94 points as disappointed investors showed how they felt about the new budget a day after its presentation.

Stocks had been on an upward trend for the last few days with expectations that the  government would replace capital gains tax with transaction tax but it did not happen, said stockbrokers. The budget only said that non-resident Nepalis (NRNs) would be permitted in the capital market which is a continuation of past policy.

Anjan Raj Paudel, past president of the Nepal Stockbrokers’ Association, said there was not much buying pressure on Monday.

“The budget didn’t address the highly expected launching of transaction tax to replace capital gains tax,” he said. “There is also no mention

of how NRNs would be allowed to invest in the Nepali capital market.”

Despite the fall in the index, the turnover amounted to Rs 487.76 million. “Based on the relatively higher transaction volume, the Nepse might not plunge by a large extent in the future,” said Paudel.

The Nepse has gained more than 50 points in the past week. The index has been on an upward trajectory since the announcement of the date for the Constituent Assembly election last year. It rose over 250 points in the last five months after the Sushil Koirala-led government was formed on Feb 10.

The Nepse had been in a buoyant mood over the past two weeks in anticipation of changes in the taxation system. The index crossed the 1,000-point mark last week for the first time in six years.

However, stock analyst Rabindra Bhattarai said that the budget was not responsible for the Nepse’s dive on Monday. “What happened was that investors booked the profits they had earned from the surge in share prices in the last two weeks,” said Bhattarai.

“In such a situation, the selling pressure rises while the buying pressure remains low and drags down the market.”

Bhattarai added that Nepal Rastra Bank’s flexible approach to the spread rate, which is the difference in interest rates on deposits and loans, caused the shares of banks to soar in the previous two weeks as investors snapped them up.

Following the budget presentation, the central ban will introduce an annual monetary policy. This will have a huge bearing on the stock market as banks have the largest presence in it.

Source: The Kathmandu Post