Kathmandu: After a period of persistent contraction that left investors wary, the Nepali share market showed a glimmer of hope last week. Following a significant drop of 380 points in the Nepal Stock Exchange (NEPSE) index and a staggering loss of 593 billion rupees in total market capitalization, the market has finally begun to flash positive signals of a potential rebound.
The downturn had been sharp; prior to the formation of the current RSP-led government on March 25, 2025, the NEPSE index stood at 2950 points. By last Monday, July 14, it had shrivelled to 2570 points. During this same window, the total market valuation plummeted from 5.009 trillion rupees to 4.416 trillion rupees, reflecting a massive erosion of investor wealth.
However, the four trading days following last Monday marked a notable shift in momentum. The index climbed for four consecutive sessions, gaining 107 points to reach 2677. This rally added 184.46 billion rupees back into the market capitalization, pushing the total valuation back above the 4.6 trillion rupee mark.
The momentum peaked last Friday, the final trading day of the week, when NEPSE surged by 79.74 points—the highest single-day gain since the current government took office. While this has sparked optimism that the market is turning a corner, it has also raised inevitable questions regarding how sustainable this growth will be and whether the upward trend can be maintained in the long run.
This recent surge was fueled by a combination of factors, ranging from grassroots investor protests to high-level political interventions by Prime Minister Balendra Shah. On Tuesday, July 15, frustrated by the continuous market decline, investors picketed the Securities Board of Nepal (SEBON) to demand action.
In response, SEBON issued a detailed press note outlining its policy priorities and market development plans to reassure the public. Shortly thereafter, the regulator unveiled the “Nepal Capital Market Development Roadmap 2083” alongside the capital market policy for the upcoming fiscal year, signalling a structured approach to sector growth.
To accelerate these developments, SEBON engaged in a series of consultations with key stakeholders, including NEPSE, CDSC, merchant bankers, stockbroker associations, credit rating agencies, and both individual and institutional investors. These meetings were aimed at gathering expert input to revitalize the financial ecosystem.
As public criticism of the government intensified alongside the market’s dip, Prime Minister Balendra Shah personally intervened. On July 17 (Asar 32), he held a high-level, hour-long meeting with the Governor of the Nepal Rastra Bank (NRB), Dr. Bishwonath Poudel. They discussed the overall economic climate, market stability, and the need for the central bank to adopt flexible policies that promote entrepreneurship and capital growth.
During the discussion, the Prime Minister emphasized that investor confidence could only be restored through seamless coordination between the government and the central bank. He urged the NRB to adopt a “parental role” to protect the interests of small-scale investors. Complementing this, Finance Minister Dr Swornim Wagle made several public statements designed to favour market growth and stabilize sentiments.
Despite these positive developments, a sense of caution remains. Investors are questioning whether this is a durable recovery or merely a short-lived “dead cat bounce” before the market returns to its previous lows. The memory of the recent slump is still fresh, leading to lingering doubts about the market’s stability.
Bharat Ranabhat, former president of the Stock Broker Association of Nepal, suggests that this week’s performance will be the true litmus test for the market’s sustainability. He noted that while the current signs are promising, one needs to see a consistent increase in both transaction volume and demand before concluding that a long-term bull run has begun.
Ranabhat attributed Friday’s massive spike to the closing of the fiscal year, coupled with the reassuring messages sent by the Prime Minister and Finance Minister. He noted that the Prime Minister’s direct engagement with the Governor served as a powerful signal to the market that the leadership is committed to economic health.
Furthermore, the Nepal Rastra Bank provided much-needed clarity on margin lending policies. The central bank maintained the provision allowing loans up to 70 per cent of either the 180-day average price or the prevailing market price (whichever is lower). This continuity helped soothe fears of tighter credit restrictions.
In a move to incentivize quality investments, the central bank also clarified that if banks evaluate a listed company’s strength and find it fits their “product paper” criteria, they can extend credit up to 80 per cent—an additional 10 per cent cushion. This applies to companies with strong capital bases, consistent profit histories, and solid regulatory compliance.
According to Ranabhat, this clarification was vital. Previously, there was a growing fear in the market that credit flows for even moderately performing companies might be slashed below 70 per cent. By setting clear benchmarks for higher lending limits, the central bank helped dissipate that anxiety.
Guragain observed that the market had been stagnant for a long time, not because of poor fundamentals, but because of a total collapse in investor morale
The Finance Minister’s secretariat also played a role in calming the waters. Last week, Dr Swornim Wagle’s office released a statement acknowledging that investor anger over the recent decline was “natural” and urged stakeholders not to panic, promising that systemic reforms were underway.
The secretariat’s message framed the stock market as a vital pillar of the national economy. They claimed that with a stable government and expert leadership now at the helm of regulatory bodies, a planned and transparent approach to market improvement is being executed, which helped bolster Friday’s gains.
Investor Dev Guragain believes that the combination of executive interest, the Finance Ministry’s assurances, and recent judicial stays on government asset investigations collectively fueled Friday’s rally. However, he remains watchful, noting that the market still needs higher trading volumes to confirm a genuine breakout.
Guragain observed that the market had been stagnant for a long time, not because of poor fundamentals, but because of a total collapse in investor morale. He believes that the government’s newfound focus on the capital market is exactly what was needed to rebuild that shattered confidence.
Another significant factor was the Supreme Court’s intervention regarding the Property Investigation Commission 2083. The commission, which had been tasked with investigating the assets of high-profile individuals, saw its operations suspended following an interim order from the court.
This suspension was seen as a relief for the market. Investigations into high-profile figures like Deepak Bhatta and Sulav Agrawal had previously created an atmosphere of fear and uncertainty, causing many large-scale investors to pull back or freeze their activities.
With the court putting a temporary halt to these probes, the atmosphere of dread has softened. Guragain concludes that with most economic and financial indicators now trending in a positive direction, there is a strong reason to remain optimistic about the market’s path forward in the coming days.
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