Addressing the Hottest Debate: Where is NEPSE Headed? (Experts Speak on Liquidity, Quarterly Performance, Fundamentals, and Political Scenario)

Wed, Apr 7, 2021 7:02 AM on Stock Market, Exclusive, Experts Speak,

"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute."

William Feather

While writing this, Nepal's investment community is divided into exactly opposite poles. The index is at an all-time high, thanks to the momentum of the bull run that started last year. 

However, not everyone has got good butterflies in the stomach on this amazing feat. Some investors feel sour about this and are of the opinion that the trend won't last long. One buys and one sells, that is how the free market mechanism works. The stock market is a constant battle between the bulls and the bears. 

Sharesansar called a few veteran stock market players to inquire how they feel about the ongoing market trend. Nothing presented in this article should be considered investment advice. Like everyone else, the veterans are free to have an opinion, and some opinions are incorrect irrespective of their source. 

Dipak Dahal, a prominent investor

When we last contacted Mr. Dipak Dahal, he was of the opinion that the rise in the number of IPOs to the public attracted a lot of otherwise-ignorant people to the stock market. The IPO issues opened this year have broken previous records one after another. What one buys, one has to sell. Thus, these new investors have entered the secondary market. Dahal was of the opinion that this, among other reasons, is a significant contributor to the flourishment of the secondary market today and the days to come.

Note that this was the time when NEPSE had not broken the all-time created in the previous bull cycle. Thus, Dahal's opinion was taken with hesitation when he said that he was confident that the index will break previous records easily and create a new benchmark.

Fast forward to today, the index has come so far from the previous all-time high. Dahal is now confident that the index will cross the 3,000 level, given the psychology of investors. In a way, 3,000 has become the psychological benchmark for the NEPSE index in the minds of investors. 

On top of it, Dahal thinks that the increased deposits because of the concluding fiscal year, stability of interest rates at low levels, and positive capital gains compared to mediocre interest rates may be some reasons the index will go further. 

Dilip Munakarmi, a prominent investor

Price is incidental, governed by supply-demand, and is of little concern to Dilip Munakarmi. As an investor, he looks at the company fundamentals, their dividend capacity, and future prospect. Thus, Munakarmi is more concerned about the company that he personally analyzes, more than what NEPSE does today or tomorrow.

Thus, instead of giving an opinion on where the market is headed, Munakarmi is more concerned about whether the move will be sustainable, irrespective of where it goes. Consequently, Munakarmi does not chase price but looks for the value within the company he analyzes.

Prakash Tiwari, a prominent investor

Tiwari thinks that the upcoming quarterly reports of companies listed on NEPSE have a bigger say on the upcoming market trend. NEPSE's recent rise to the all-time high is a significant event, but it may only be a psychological retracement in the absence of strong fundamentals. 

Furthermore, Tiwari also stated that investors are closely watching the changing political scenario in the country. The new political formation has an important say in the upcoming policies of the central bank and the national budget. Thus, all that investors can do at the moment is to wait and watch what unfolds. 

Mr. Narayan Prasad Pokhrel, Deputy Spokesperson And Information Officer, Nepal Rastra Bank

The discussion on liquidity has been a hot topic in the investment community today. Pokhrel is certain about one thing: the central bank will never allow liquidity to be as high as the time when businesses were shut down during the pandemic. The only reason the liquidity was that high during that time is that the central bank was in a state of wait-and-watch. Immediately after businesses started to operate normally, the economy began to absorb the liquidity.

For a quick comparison, there was excess liquidity of Rs. 51 Arba one day before the nationwide lockdown was imposed. During the pandemic, the liquidity in the economy was as high as Rs. 200 Arba. While writing this article, the central bank has recorded excess liquidity of Rs. 48.5 Arba on Chaitra 23, 2077. 

However, Pokhrel warns that this is not a result of the tightening of policies by the central bank. As the lockdown was eased, the economy itself gradually became functional and the central bank only poured the liquidity back to operation via different instruments. This flow of investment and capital should be considered a good sign that the economy is regaining its momentum, Pokhrel states.