Nepse slips as post-budget rally loses momentum

The Nepal Stock Exchange (Nepse) index experienced a downturn this week, shedding 26.69 points to close at 2,755.41. This decline marks a 0.96% decrease from the previous week's close of 2,782.10, as investors engaged in profit-taking following the federal budget announcement. The market's rally lost momentum, with the "buy the rumour, sell the fact" pattern evident in the post-budget trading.

Market capitalization also saw a significant contraction, falling from Rs4.746 trillion to Rs4.701 trillion, resulting in a loss of approximately Rs45 billion in investor wealth over five trading days. This downturn reflects a broader reassessment of fiscal measures and the near-term market direction by investors. Key market indicators, including the Sensitive Index, Float Index, and Sensitive Float Index, also weakened, signaling a cautious sentiment.

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the government’s plan to offer shares of Bishal Bazar Company to the public affected sentiment, pressuring the stock and dragging the broader trading sector due to its high market weight.

Liquidity and trading activity slowed considerably, indicating a shift towards a wait-and-watch approach among both institutional and retail investors. While the cumulative turnover increased in the week following the budget, the daily average eased, suggesting weaker per-day activity. Market analysts observed that the falling market, coupled with relatively high turnover, points to sustained selling pressure that could further impact short-term sentiment.

Sector performance was mixed but predominantly negative, with nine out of 14 sub-indices ending in the red. The Trading subindex led the losses, falling 6.98%. The Hydropower and Manufacturing and Processing sub-indices also saw declines. Conversely, the Finance subindex rose 6.91%, and Non-Life Insurance gained 4.65%, boosted by budget provisions that are expected to increase premium income. Insurance stocks, in particular, benefited from doubled third-party motor insurance coverage and mandatory insurance for building design approvals in urban areas.

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insurance stocks were boosted after the budget doubled third-party motor insurance coverage to Rs1 million from Rs500,000 and made insurance mandatory for building design approvals in urban areas, both of which are expected to lift premium income.