Nepal stock market drops 1.79% amid cautious trading

The Nepal Stock Exchange (Nepse) index reversed its recent gains, dropping 49.06 points, or 1.79 percent, to close at 2,685.54 points during the trading week of July 27 to July 31. This downturn wiped out Rs80 billion in market value, shrinking the overall market capitalization to Rs4.62 trillion from Rs4.70 trillion.

Trading activity also slowed as investors adopted a cautious stance. Weekly turnover fell by 23.51 percent to Rs21.67 billion, with the average daily turnover dropping to Rs4.33 billion. Most sectors experienced losses, with Manufacturing and Processing seeing the steepest decline at 3.53 percent. Commercial Banking was the sole exception, posting a modest gain of 0.15 percent.

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Companies’ financial performance is expected to improve. But investors are waiting for government policies and assurances to translate into results.

Market analyst Jagannath Dhungel attributed the fall to profit-taking by traders after a recent rally. He noted that institutional investors are gradually re-entering the market, anticipating improved company financial performance. However, Dhungel highlighted that investors are awaiting concrete results from government policies and assurances.

An anonymous experienced investor pointed to unrest in the Tarai region as a potential factor affecting market sentiment, though it was not the sole cause. This investor expressed concern that institutional investors remain unconvinced about the government's commitment to implementing supportive market policies. Weak investor confidence was further attributed to an oversupply of shares, uncertainty surrounding ongoing investigations, and the poor financial health of many listed companies.

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Investor confidence remains weak due to oversupply, uncertainty surrounding investigations, and poor financial health of many listed companies.