Kathmandu: Nepal’s capital market today has a market capitalisation of more than Rs 47 trillion, a financial monument built not merely on numbers but on the confidence of millions of ordinary citizens and investors. Every rupee parked in listed securities represents a belief: that investments will remain secure, ownership rights will be protected, and returns will eventually justify the risk. That collective trust is precisely what has allowed Nepal’s stock market to expand to its current scale.
But it is worth confronting an uncomfortable question: what happens if that trust begins to collapse?
If investors no longer believe the market is fair, transparent, and regulated, the consequences would extend far beyond falling share prices. The very foundation of Nepal’s emerging financial architecture could begin to crack. Ideally, such a question should not even arise in a developing capital market that is still maturing. Yet recent developments have made it impossible to ignore.
Separate investigation reports recently made public by the Securities Board of Nepal have revealed a disturbing level of manipulation and illegality inside the country’s stock market. The probes into Deepak Bhatta and Sulabh Agrawal, coming after an earlier investigation into trader Dipendra Agrawal, have exposed how a handful of individuals appear to have operated with astonishing impunity, using multiple trading accounts, connected-party transactions, sham ownership transfers, and circular buying and selling to distort prices and siphon financial benefits.
In the earlier Dipendra Agrawal case, regulators had found that he personally operated the TMS accounts of 15 individuals, using them to generate artificial trades while simultaneously influencing retail investors through social media and other channels. Shares appeared to be changing hands in the system, but actual beneficial ownership remained within the same connected network. Even then, it had become increasingly clear that Nepal’s stock market was not being shaped solely by natural demand and supply, but by the dominance of certain individuals and syndicates.
What has emerged from the Bhatta and Sulav Agrawal investigations, however, is even more alarming. According to Sebon’s findings, Bhatta misused funds of public companies such as Himalayan Reinsurance and Himalayan Life, while also engineering fictitious debenture transactions among his own related entities—effectively moving money from one pocket to another for personal gain. At the same time, Bhatta appears to have run the TMS accounts of multiple companies through a single operator, raising serious questions about surveillance failure.
Sulav Agrawal, on the other hand, allegedly staged a so-called “family partition” arrangement simply to bypass legal restrictions on selling shares. Investigators found that although some transactions were shown under his son’s name, the email addresses, mobile numbers, and IP addresses used were still his own. In plain terms, the evidence suggests he was selling to himself, buying from himself, and manufacturing price movements while pretending the trades were genuine market activity.
This naturally leads to a much larger institutional question: how could such large-scale manipulation of citizens’ wealth continue under the watch of the Securities Board, the Nepal Stock Exchange, CDS and Clearing, and the broader regulatory state? How did a few individuals gain such sweeping illegal control over a marketplace that holds the savings of millions?
If that erosion of trust accelerates, Nepal could face a dangerous liquidity trap. Investors would begin pulling capital out, but because the market itself depends on active trading and confidence-based valuations, much of the Rs 47 trillion in paper wealth could effectively become frozen
More troubling still is that these three individuals came under scrutiny only because complaints were filed or security agencies pushed for an investigation. That means regulators were not proactively identifying these patterns through surveillance—they were reacting after the fact. If such dramatic misconduct was uncovered only in these isolated probes, one must ask how many similar actors may still be operating quietly across the system. How deeply has this culture of manipulation penetrated Nepal’s capital market?
This is where the issue stops being a story about a few rogue traders and becomes a systemic risk.
A stock market survives on confidence more than cash. Once investors begin to suspect that prices are being rigged, that insiders can misuse public company funds, that connected traders can create fake liquidity, and that regulators remain asleep until forced awake, participation starts to shrink. Investors no longer enter with enthusiasm; they enter with fear, or leave altogether.
If that erosion of trust accelerates, Nepal could face a dangerous liquidity trap. Investors would begin pulling capital out, but because the market itself depends on active trading and confidence-based valuations, much of the Rs 47 trillion in paper wealth could effectively become frozen. Shares may exist on paper, but their ability to convert into real economic value would diminish sharply. In such a scenario, trillions of rupees in household and institutional wealth would sit immobilized, dragging down not just the stock exchange but the wider financial system.
This is because the capital market is not simply a venue where shares are bought and sold. It is one of the country’s most important channels for capital mobilization. Large industries, infrastructure projects, hydropower ventures, financial institutions, and expansion-oriented companies rely on public investment and secondary market confidence to raise funds. Small savings from the public are pooled here to create large pools of productive capital. If this mechanism becomes unhealthy, the pipeline of long-term domestic financing weakens.
The market also reduces pressure on banks. In the absence of a functioning capital market, companies would be forced to rely far more heavily on bank loans. That would push up competition for limited deposits, increase borrowing costs, and make access to credit more difficult across the economy. In other words, a weak stock market eventually feeds into a weak banking environment.
The capital market also provides something no bank deposit can: liquidity with ownership retention. Investors know they can convert shares into cash whenever necessary. This tradability is one of the key reasons everyone from ordinary citizens to large corporations participates. It also gives new entrepreneurs a route to raise equity rather than borrowing themselves into unsustainable debt. More importantly, it allows common citizens to own small stakes in large and profitable companies—democratizing wealth creation in ways few other financial instruments can.
The state, too, benefits enormously. Capital gains taxes, brokerage taxes, listed company taxes, transaction fees, and public financing opportunities all contribute to government revenue and development financing. A functioning capital market also sends a positive signal to foreign investors, who often assess the maturity of a country’s financial markets before committing capital. If Nepal’s market appears opaque, disorderly, or manipulable, foreign investment confidence will weaken as well.
And the damage would not stop there. If investor confidence collapses and market valuations decline sharply, banks that have lent against share collateral or against the balance sheets of listed companies could also come under stress. Corporate valuations would shrink, collateral values would weaken, and repayment risks could rise. A capital market crisis would thus spill into banking, business financing, and public revenue simultaneously.
There is another immediate danger embedded in the current investigations. Sebon’s report shows that Deepak Bhatta purchased 2,072,213 shares of Nepal Reinsurance through Bhrikuti Stock Broking worth Rs 3.10 billion, but sold only around Rs 930 million worth, meaning he still owes the broker more than Rs 2.17 billion. Similar unpaid liabilities exist in the names of Subhi Agrawal, Rishiraj Mora, and Rajbahadur Shah, with Rajbahadur alone owing nearly Rs 897 million after paying only a fraction of his Nepal Reinsurance purchases.
These are not small bookkeeping mismatches. They are liabilities large enough to distort the market when settlements are enforced. To clear these dues, the concerned parties may have no option but to dump shares into the market. And because the volumes involved are enormous, such forced selling could inflict collateral losses on thousands of unrelated investors holding the same securities. In that sense, the misconduct of a few may directly transfer financial pain to the wider investing public.
The use of stronger surveillance technology, transaction pattern analytics, beneficial ownership tracing, and real-time linked account monitoring is no longer optional
This is why the matter demands far more than isolated punishment.
Nepal’s regulators must now ask a much deeper question: how was such manipulation structurally possible, and how many more players are engaged in similar practices? With more than 7.7 million demat accounts, roughly 6.8 million Mero Share accounts, and over 4.9 million active Mero Share users, the market is no longer a niche financial playground—it is a mass public institution. Any prolonged perception that this institution is controlled by syndicates rather than law will discourage both current and future investors, while also pushing many of the country’s 250-plus listed companies, and hundreds more aspiring issuers, away from the public market.
The use of stronger surveillance technology, transaction pattern analytics, beneficial ownership tracing, and real-time linked account monitoring is no longer optional. The investigations into Bhatta, Sulav Agrawal, and Dipendra Agrawal are a positive beginning, but only a beginning. The bigger task is to determine whether these are isolated offenders or symptoms of a much deeper disease.
Because if a handful of individuals are allowed to continue treating the public’s wealth as their private playground, the Rs 47 trillion capital market built on investor confidence will not disappear overnight—but it can gradually lose its soul, its liquidity, and eventually its economic purpose. And once trust leaves a capital market, rebuilding it is far harder than losing it.
Comment Here