With approximately 22% of Nepal’s total population connected to the stock market, interest in its movements is both natural and significant. NEPSE often reacts to even the slightest changes in economic, political, or policy conditions. Predicting whether the market will rise or fall in FY 2082/83 is no simple task. However, based on historical performance and key economic indicators, we can attempt a reasoned projection.
The Trigger: A Softer Monetary Policy
On Asar 27 (July 12), Nepal Rastra Bank unveiled the Monetary Policy for FY 2082/83—the first under Governor Dr. Vishwanath Paudel. Aiming to stimulate the sluggish economy, the policy reflected flexibility and a relatively capital market-friendly approach.
The stock market responded positively at first. On Asar 29, NEPSE surged by 29 points and turnover crossed NPR 11 billion. But this momentum didn’t sustain—the index declined by 35 points on the second trading day, and the transaction volume dipped as well.
On the final trading day of FY 2081/82, however, NEPSE closed 34.61 points higher at 2,794.78, with total turnover surpassing NPR 14 billion—making it a hopeful send-off for the new fiscal year.
Market Composition Matters
In global economies, the stock market is often a clear reflection of overall economic health. But in Nepal, the picture is more nuanced. Among the 260 companies listed on NEPSE, the majority are banks and financial institutions. Sectors like hydropower, manufacturing, processing, tourism, and trade represent only a small portion. Because of this imbalance, NEPSE does not provide a complete image of the nation’s economic dynamics.
As of Asar-end 2082, the number of investors in Nepal’s stock market reached 6.39 million, with around 2.1 million actively participating in the secondary market. That’s nearly 22% of the national population—a major demographic tied to market performance.
What Causes the Market to Fall?
Multiple variables can cause NEPSE to decline:
- High interest rates
- Liquidity crunches
- Political instability
- Unfavorable economic conditions
- Insider trading and cornering
- Dwindling investor confidence
- External shocks and inflation
A look into historical downturns reveals that NEPSE is highly sensitive to macroeconomic changes, policy shifts, and investor psychology.
When and Why Did the Market Rise in the Past?
Let’s examine the biggest bull runs and their triggers:
FY 2064/65 (2007/08):
- NEPSE hit a peak of 1,175 points.
- The rise was fueled by political optimism after a decade-long conflict ended and a new direction was set via the Constituent Assembly.
- The GDP growth rate was 5.6%, the highest in 8 years.
- NRB’s monetary policy increased money supply by 15.6% and kept interest rates low.
- Bank credit flowed strongly into capital markets due to excess liquidity.
But the surge was short-lived. By FY 2067/68, NEPSE had dropped to an annual average of 362.9 points.
FY 2070/71 (2013/14):
- The second bull run peaked with an average NEPSE of 1,036.1.
- This was the election year for the second Constituent Assembly.
- The national budget and monetary policy were both market-friendly.
- Digitization began, and institutional and NRN investments were encouraged.
- Credit and deposits grew by about 16%, and the GDP growth rate hit 5.7%.
FY 2077/78 (2020/21):
- The most recent bull market pushed NEPSE to an all-time high of 3,199.03 points on Bhadra 2, 2078.
- COVID-19 lockdowns shut down other investment avenues.
- Demat accounts surged by 116%.
- Online trading volume grew by a massive 2,848% in just one year.
- Budget and monetary policy remained accommodative.
Liquidity overflow and a sudden influx of retail investors via digital platforms fueled this surge. But the bullish cycle ended again within a few years.
What Led to Market Declines?
FY 2067/68 to 2069/70:
- Political uncertainty returned due to delays in drafting the constitution.
- Investor confidence weakened.
- Banks diverted credit to real estate.
- NRB tightened margin lending policies.
- Bonus and rights shares flooded the market, increasing supply without matching demand.
FY 2072/73:
- The devastating earthquake of 2072 weakened all economic activity.
- GDP growth fell below 1%.
- Despite the promulgation of a new constitution, recovery was slow.
FY 2074/75:
- Madhes protests and dissatisfaction with the new constitution created unrest.
- The government prioritized loans to productive sectors (agriculture, tourism, SMEs), tightening credit to capital markets.
- Trade deficit pressure led to tighter financial regulations.
FY 2082/83 Outlook: What Can We Expect?
Looking ahead to the current fiscal year, there are both promising and cautionary signs.
Positive Indicators:
- Lower interest rates (around 8%)
- Ample liquidity in the banking system
- Investor-friendly monetary policy
- Increased digital access to trading
- New IPOs expected from companies long halted
- Upcoming 2084 elections could drive economic activity
These factors suggest that the stock market could maintain a moderately bullish trajectory if macro and political environments remain stable.
Risks and Limitations:
- Investment demand remains weak despite cheap credit.
- The government’s internal revenue struggles may trigger future restrictions on margin lending.
- Political instability remains a constant risk.
- Global market uncertainty could spill over into Nepal.
Conclusive analysis: Moderate growth likely, but no guarantees
While there is no certainty, FY 2082/83 appears positioned for a moderately positive year for the Nepali stock market. Liquidity, low interest rates, investor optimism, and policy friendliness provide a supportive backdrop.
However, structural economic weaknesses, political unpredictability, and global instability could limit upside potential.
If the market avoids manipulation and illegal trading activities, the NEPSE index is likely to move gradually upward—but sudden volatility cannot be ruled out.
