Kathmandu: The Nepal Stock Exchange (NEPSE) index sharply declined on both trading days after the Dashain holidays. The market, which reopened after eight days, fell by 58.55 points on Tuesday and 45.36 points on Wednesday — a total drop of 103.91 points.
As all sectoral indices turned red, the share prices of most listed companies contracted. Following the Gen Z protests on September 8 and 9, investors have been gripped by fears of growing political instability.
Before the protests, on September 7, NEPSE had stood at 2,708 points, but by Wednesday (October 8), it had dropped by 148 points to 2,559. Although the interim government led by Sushila Karki has announced parliamentary elections for March 5, doubts are rising about whether the elections will actually be held on time.
Concerns are growing that if elections are delayed, the country could fall into deeper political instability and complications. Nepal’s stock market, highly sensitive to even minor political changes, has been affected by the shifting post-protest environment.
On the first day of the Gen Z protests (Setember 8), NEPSE had already fallen by 35.99 points. The market, which had been closed because of the protests, reopened only on September 18. On that day, NEPSE hit a third consecutive negative circuit breaker, plunging by 160 points to 2,511.
Seeing investor panic, Finance Minister Rameshore Khanal formed a four-member task force. On September 19, the day after the massive fall, Khanal appointed Acting Executive Director of the Securities Board of Nepal (SEBON), Rupesh KC, as coordinator of the task force.
The task force was formed to study market distortions and problems and to recommend systemic and procedural reforms to restore investor confidence and present an actionable plan for market stability.
Following Khanal’s intervention, the stock market briefly recovered — rising by 111 points on September 21 and 58 points on September 23. However, the rebound could not continue, and in the next five trading sessions, NEPSE fell on four of them.
Former President of the Stock Brokers Association, Bharat Ranabhat, said investors fear deeper political instability after the Gen Z protests. “Floods and landslides are recurring issues and don’t shake investors much. But after the protests, uncertainty over the political future has unnerved the market,” he said. “Rumours of election delays have further worsened investor confidence.”
He added that if elections are not held on time, Nepal’s political environment could deteriorate further, which has already reflected in the market. Investors were initially optimistic when economist and former finance secretary Rameshwor Khanal was appointed finance minister under Sushila Karki’s interim government.
Though investors welcomed his appointment, believing a finance minister well-versed in economics and the stock market would help, the overall market environment did not improve. As the interim government’s main focus remained on holding elections, growing fears that even those might be delayed naturally led to panic in the market.
The task force formed by Minister Khanal has already submitted its report. It recommended nearly three dozen measures, including removing the Rs 250 million cap for single-client margin lending. Investors and brokers are now pushing for implementation of those recommendations.
On Wednesday, Nepal Rastra Bank scrapped the Rs 250 million ceiling for margin lending against shares. Previously, it had capped loans at Rs 40 million per bank and Rs 120 million across all banks, later revising it to Rs 120 million from a single bank. While the institutional limit had been raised earlier, the personal limit of Rs 250 million has now also been abolished.
Similarly, banks and financial institutions have been granted greater flexibility to invest in the stock market. The rule that allowed investment only in shares or bonds for a year or longer has been relaxed. Banks can now invest in the secondary market for shares and bonds with a minimum holding period of six months.
After holding such investments for at least six months, banks can sell them entirely at once. Previously, they could sell only up to 20 percent of their primary capital even after a year. This had restricted stock trading despite high liquidity. Now, banks can participate more actively in share trading.
On Wednesday, the Stock Brokers Association of Nepal (SBAN) welcomed the task force report and urged its immediate implementation. The association stressed that although task forces often produce recommendations, they rarely get executed, and prompt action was necessary for capital market reform.
Right after the Gen Z protests, several investor groups had argued that the market should remain closed temporarily, fearing sharp declines due to investor panic. They said the market should reopen only after a stable environment was ensured.
Nevertheless, the market reopened and saw high volatility. Investors now believe that the market will not recover until the political climate stabilizes. Former president of the Nepal Investors Forum and investor Ambika Prasad Paudel said fears of growing instability had led to a shrinking market in recent trading days.
“Most indicators and policies are market-friendly,” said Paudel, “but the future of our politics remains uncertain after the Gen Z protests. The Nepali stock market has always reacted immediately to political realignments — and now, political instability has once again made it contract.”
He added that the market would struggle to regain rhythm until the political path ahead becomes clear. Currently, there has been little active discussion among parties about holding elections by Falgun 21, and major parties have started expressing dissatisfaction, accusing rivals of taking retaliatory steps.
If elections are delayed, the country may face even greater problems — which is already evident in the continued market decline. During the Gen Z protests on Bhadra 24, significant damage occurred to public and private infrastructure, initially dragging down the share prices of reinsurance companies.
On Wednesday, share prices of 18 companies rose, while those of 232 companies fell. The banking index dropped 1.48 percent, development banks 2.28 percent, finance companies 3.09 percent, hotels and tourism 3.03 percent, and hydropower 2.34 percent.
The investment and non-life insurance indices also fell by more than 2 percent, while other sectors declined by around 1 percent. Although NEPSE hit a low of 2,535 points on Wednesday, it recovered slightly to close at 2,559.
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