Weak demand keeps Nepal’s stock market under pressure

Nepal's stock market experienced a downturn in the trading week of August 17-21, with the benchmark NEPSE index falling 25.11 points, or 0.95 percent, to close at 2,618.72 points. This decline eroded investors' paper wealth, reducing total market capitalization by about Rs43 billion to Rs4.504 trillion.

Despite the overall market slump, trading activity saw a substantial increase of 15.33 percent, reaching Rs21.22 billion for the week. This surge was largely fueled by heavy turnover in the hydropower and manufacturing sectors, which were among the few to post gains. Conversely, the Finance sector suffered the steepest decline, dropping 2.37 percent.

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The biggest problem right now is oversupply and a lack of demand.

Investor and market analyst Tilak Koirala identified oversupply and a lack of demand as the main culprits behind the market's stagnant momentum. He recommended government measures to stimulate demand, such as creating an institution to pool funds from major investment bodies for stock market investment. Koirala also expressed concern that the government's approach, including investigations into capital market activities, has created uncertainty and weakened investor confidence, leading many small investors to exit and big investors to hesitate.

Koirala emphasized the urgent need for the government to restore confidence through regulatory changes that encourage greater participation from institutional investors. He suggested that such steps are crucial for short-term market boosts and for the broader health of the capital market.

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Most small investors have already exited the market, while big investors are hesitant to increase their investments because of a lack of confidence. The government needs to take steps to restore that confidence.