After showing strong upward momentum for over a month since mid-July, Nepal’s stock market took a surprising dive today. This sudden decline comes just days after the NEPSE index hit a four-year high. However, the market couldn’t sustain above the 3,000-point level and closed significantly lower, creating confusion and concern among investors.
What triggered today’s drop?
- On Sunday, the market saw a massive turnover of Rs 26.5 billion, one of the highest in recent months.
- Following that, trading volume gradually decreased.
- Today, the market saw a sharp fall in both the index and trading sentiment.
Investors divided over the reason
There are two main explanations floating in the market:
- Profit booking after a strong rally
Economist Surya Narayan Paudel explained, “Today’s decline is purely due to profit booking. Before the market climbs higher, it often pulls back to shake out nervous investors. This is healthy.”- According to him, many investors who bought shares around the 1,800-point level have now seen significant gains and are taking profits.
- He believes the market is preparing to break through the 3,200 mark after this correction.
- Paudel also noted that July-August is a time when many investors manage their cash positions, typically trading only 30% of their portfolios.
- Concerns over ISIN and regulatory changes
- Some investors have blamed confusion over the ISIN (International Securities Identification Number) regulations as a reason for today’s panic.
- However, CDSC Managing Director Prabin Pandak clarified that Sunday’s board meeting merely clarified existing rules:
“We simply made it clear how ISINs will be assigned based on company articles and bylaws. The goal is to prevent founders and public shares from being mixed and sold before the lock-in period ends.” - She dismissed any link between the ISIN decision and today’s market decline, saying: “The decision was made on Sunday. Why would the market react only today?”
- SEBON spokesperson Niranjay Ghimire also confirmed that a directive on the ISIN matter is being reviewed and studied, not enforced yet.
While some may speculate regulatory uncertainty triggered the drop, experts say it’s a normal market correction after a prolonged rally. The fundamentals haven’t changed significantly, and such pullbacks are often seen as healthy resets before another move upward.
