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🇳🇵 Nepal /Economy & Trade

Nepse drops 49.70 points as market enters correction phase amid caution and investigations

From Kathmandu Post · (4m ago) English Critical tone

Translated from English, summarized and contextualized by DistantNews.

TLDR

  • The Nepal Stock Exchange (Nepse) index dropped 49.70 points this week, entering a correction phase due to profit-booking and investor caution.
  • Investor wealth decreased by approximately Rs 80 billion, with market capitalization falling to Rs 4.75 trillion and weekly turnover declining by 18.31 percent.
  • Analysts attribute the decline to heightened volatility, ongoing investigations into market manipulation, and weak economic prospects, leading to a wait-and-see approach by institutional investors.

The Nepal Stock Exchange (Nepse) experienced a significant downturn this week, shedding 49.70 points and entering what analysts are calling a correction phase. This decline, marked by a Rs 80 billion loss in investor wealth and a notable drop in trading volume, reflects a broader trend of increased investor caution and profit-booking following recent gains. The market's vulnerability is further highlighted by the significant drops in most sub-indices, with only the Manufacturing and Processing sector showing a marginal gain.

With the market transitioning to a Monday-to-Friday trading schedule and third-quarter financial reports approaching, institutional investors seem to be de-risking, creating a wait-and-see environment.

— Ajaya Singh ThapaAnalyst Ajaya Singh Thapa explains the cautious behavior of institutional investors.

Several factors are contributing to this bearish sentiment. Heightened investor caution, coupled with ongoing investigations into suspected market manipulation and recent high-profile arrests, has shaken confidence. Institutional investors are reportedly de-risking and adopting a wait-and-see approach, especially with the market transitioning to a new trading schedule and third-quarter financial reports on the horizon. This contrasts sharply with the behavior of retail investors, who appear to be reacting with panic, often concentrating on low-cap, high-volatility stocks.

Retail investors, meanwhile, appear to be reacting with panic following recent high-profile arrests.

— Ajaya Singh ThapaAnalyst Ajaya Singh Thapa describes the reaction of retail investors.

Analysts like Ajaya Singh Thapa point to weak economic prospects and what they describe as an "IPO-driven bubble" as underlying issues. For sustainable long-term growth, the market requires stronger economic fundamentals. The current technical indicators suggest immediate support at 2,742-2,772 and resistance between 2,835 and 2,865. The market's immediate future appears to be one of consolidation and pressure, with a clear need for fundamental economic improvements to foster genuine, broad-based growth.

For sustainable long-term growth, the market needs stronger economic fundamentals.

— Ajaya Singh ThapaAnalyst Ajaya Singh Thapa emphasizes the need for economic improvement.
DistantNews Editorial

Originally published by Kathmandu Post in English. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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