KATHMANDU, Aug 27: The stock market has rebounded following the clarification from the
Nepal Rastra Bank (NRB) that its directive related to the threshold of banks and financial institutions (BFIs) investment on ´held-for-trading´ has nothing to do with the share market downfall and government officials remarks that there was no situation in the bourse to panic.
Nepal Stock Exchange (Nepse) benchmark index jumped 38.57 points to close at 960.43 points on Wednesday following NRB´s clarification and government officials´ remark which overshadowed the lingering concerns of investors that the NRB was trying to tighten the investment flow of the BFIs toward the capital market.
The market had gone down a total of 75.93 points in last three trading days until it bounced back on Wednesday.
The downfall of the market after the NRB issued the directive on one percent threshold on ´held-for-trading´ investment had created a sort of panic among the investors that market was heading toward the bearish trend from the bullish, prompting them to offload their scrips which created selling pressure in the market in last three days.
The intense selling pressure had even forced Nepse to impose the circuit breaker on Monday after the benchmark index plunged 4 percent after two hours of trading session begun.
However, the market observed the opposite trend on Wednesday. The fast rising index due to the extreme buying pressure led to the suspension of the trading twice on the day due to the circuit breakers imposed by the Nepse.
Nepse hits index breaker circuit breaker at three stages if the index goes up or down by 3, 4 and 5 percent.
"The investors were worried about the confusing directive issued by the NRB a week back which pull down the market. Panic-stricken investors started divesting their shares which further deteriorated market," said Narendra Sijapati, president of Stock Brokers Association of Nepal (SBAN).
"Since the NRB has issued clarification that its one percent limit for the BFIs to make investment was only for the ´held-for-trading while 30 percent total investment has remained intact. This has sent positive vibes among the investors," he added.
The circular of the NRB had drawn criticisms from the investors for the lack of clarity and the room for the misinterpretation. "The directive that came out all of sudden sent the market down. The NRB should at least consult the capital market regulator Scurrilities Board of Nepal (Sebon) before introducing any directives that affect the stock market," Dipendra Agrawal, member of Investors Forum Nepal, told Republica.
The NRB had issued a clarification on Tuesday saying that it had not made any changes in the total cap of 30 percent out of total core capital in the securities like bond, shares, debentures or mutual funds. Similarly, joint secretary at Ministry of Finance, Krishna Prasad Devkota, had made the public statement urging investors to not panic, saying that the government was careful to not create a situation where the secondary market would further deteriorate.
Except Hotels group, all the trading groups ended in the green zone on Wednesday. Insurance was the highest gainer which sub-index went up 248.9 points to settle at 3,849.96 points. Hotels group, however, shed 2.49 points to close at 1,866.59 points.
A total of 1.3 million units of shares of 140 companies worth Rs 617.41 million were traded in the market through 3,830 transactions.
Prime Life Insurance Company (PLIC) was the highest gainer of the day with its price going up by Rs 83 to close at Rs 913 while Malika Bikas Bank´s price dropped highest by Rs 20 to settle at Rs 255.