NEPSE records a gain; study shows falling industrialisation; NRB tweaks investment and import rules

Week in NEPSE: Dec 28-Jan 1

This week began with a strong surge in the index, a market gain of 47.55 points in a single day to close at 2,633.42 on Sunday (Dec 28), following the news of two popular politicians joining hands for the upcoming elections.

On December 28, Kathmandu Mayor Balen Shah and Rastriya Swotantra Party (RSP) President  Lamichhane signed the 'Broad Unity' agreement. As per the deal, Shah will run in the upcoming parliamentary elections under the RSP banner and, if elected, become the parliamentary party leader, positioning him to become prime minister should the RSP form the government.

The single-day gain was one of the largest in the last couple of weeks.

However, the momentum was short-lived. The market dropped by 10.5 points the next day, rebounding by 10.87 points on Wednesday, falling again by 10.84 points, closing at 2,620.92 at the start of the new year. 

NEPSE index movement [Dec 28 - Jan 1]

The market turnover mirrored the price movement. On Sunday, it reached NRs 5.47 billion, falling to NRs 4.77 billion the day after. After a market pause, the turnover climbed to NRs 5.13 billion, only to marginally decline to NRs 4.71 billion on the last closing day.

Index highlight

The broader indicators mirrored this market sentiment. Both the sensitive index and the float index decline confirm that selling pressure was not limited to freely traded shares, but also large capitalised stocks in the market.

Index performance (% change)

Meanwhile, losses were largely driven by debentures and selected equities. 

Debentures including 9% ICFC Finance 2088 (ICFCD88), 9.5% NCC 2086 (NCCD86), Himalayan 80–20 (H8020), and 10.24% Citizen Bank 2086 (CIZBD86) repeatedly appeared among the top losers.

While other stocks, including Sun Life Insurance (SNLI), Super Madi Hydropower (SMHL), Swabhimaan Laghubitta Bitiya Sanstha (SMFBS), Sayapatri Hydropower (SPHL), and others, also saw a decline, signaling waning momentum in parts of the market.

Market watch: News, policies, and listings

NRB eases rules for overseas investment and repatriation

Nepal Rastra Bank (NRB) has eased its repatriation rules for foreign investors and outbound investment rules for Nepali information technology (IT) companies.

Foreign investors can now receive foreign exchange directly through commercial banks by submitting an application and will no longer require the NRB’s prior approval. Approvals will have to be issued within 15 working days. Previously, investors had to meet this requirement to transfer earnings from share sales, dividends, company liquidation, or technology agreements abroad.

Similarly, Nepali IT companies can now use up to $20,000 in foreign exchange for overseas investments, even if they haven’t earned foreign currency before.

In June, NRB amended the Foreign Investment and Foreign Loan Management Bylaw, 2021, allowing overseas investment of up to $1 million or 50% of a company’s average foreign currency earnings from IT service exports over the past three fiscal years, whichever is lower. This, however, applied to only IT firms which had a track record of exports.

Additionally, FDI is now permitted in blacklisted Nepali companies, subject to disclosure by the investors acknowledging the firms’ status. Such companies, however, cannot repatriate funds.

NRB tightens silver imports

The central bank introduced a new provision this week for silver importers, replacing the transaction-based quota for the foreign exchange facility with a fixed monthly ceiling.

Industries using silver for jewellery, artistic items, or utensils can now access up to $2 million per month, while other businesses are set a monthly limit of $400,000, provided that they bring in a larger amount in a single monthly transaction. 

Earlier, industries were allowed to access foreign exchange facilities of up to $500,000 per transaction, while other businesses could obtain $100,000 per transaction. 

The new provision has made commercial banks responsible for the verification of silver imports entering the country. Where export of the finished goods is required, the bank must also confirm that those exports have been completed.

Importers are additionally required to make a self-declaration stating that they have no outstanding payments for silver import at any commercial bank. For silver imported against an advance export order, banks must verify the value and quantity mentioned in the required documents.

The central bank has instructed banks to strengthen verification and monitoring of silver imports and exports, following existing foreign exchange and trade rules.

Silver is in high demand lately despite the rise in prices. The country imported 22,745 kg of silver, amounting to NRs 4.97 billion in the first five months of the current fiscal year, compared to 4,211 kg of silver amounting to NRs 575.3 million during the same period of the previous fiscal year. This represents a staggering surge by 764% in import value over the period.

As of today, silver costs NRs 4,525 per tola and NRs 3,879 per 10 grams.  Two months prior, it was traded at NRs 3,275 per tola and NRs 2,808 per 10 grams, marking a 38.1% surge in the price.

Industrial capacity utilisation slips further

This week, NRB released its Economic Activities Study Report, which shows Nepal’s industrial sector continued to operate below potential in the last fiscal year, with average capacity utilisation falling to 44.5% in fiscal year 2024/25, down from previous 48.3%.

Among sectors, tyre and tube industries recorded the highest utilisation at 90.7%, while hydrogenated vegetable oil (banaspati ghee) industries saw the lowest at just 1.1%, despite a year-on-year improvement.

Capacity utilisation improved across several industries, including edible oils such as banaspati ghee and soybean oil, biscuits, instant noodles, beer, cigarettes, textiles, pharmaceuticals, soap, plastic goods, iron and steel products, GI pipes, and transformers. However, utilisation declined in sectors such as mustard oil, processed milk, rice, wheat flour, animal feed, sugar, chocolate, tea, liquor, soft drinks, footwear, and electricity generation.

Regional trends were mixed. Madhesh and Karnali provinces recorded higher capacity utilisation, while Koshi, Bagmati, Gandaki, Lumbini and Sudurpaschim saw declines.

During 2024/25, 700 new industries were registered with the Department of Industry, led by tourism (235) and information technology (185), followed by services, manufacturing, energy, agriculture, infrastructure and mineral-based sectors. Of these, 578 were small industries, while 68 were large and 54 medium-sized. Most registrations—543 industries—were concentrated in Bagmati Province.

These new industries accounted for NRs 2,581.18 billion in capital mobilisation and proposed employment for 35,141 people.

Meanwhile, bank lending to the industrial sector rose to NRs 1,699.49 billion by mid-July 2025, an 11.95% increase from a year earlier, outpacing the previous year’s growth. Industrial loans made up 30.42% of total outstanding credit, with the largest share flowing to non-food manufacturing, followed by energy, agriculture and beverages, construction, metal and machinery industries, and mining.

NRB absorbs excess liquidity

NRB continued its liquidity management measures by raising NRs 20 billion through a 12-day deposit collection auction on December 28.

Additionally, it issued two debentures, ‘NRB Bond 2083 Ka’ and ‘NRB Bond 2083 Kha’, each amounting to NRs 25 billion. Both are one-year bonds that carry semi-annual interest payments, with their interest rates determined through competitive bidding among licensed BFIs.

Trading spotlight: IPOs and listed companies

This week, Salapa Bikas Bank Limited (SBBL) opened its IPO, issuing 1,439,178 shares for the general public, with Muktinath Capital as its issue manager.

Salapa is a ‘B’ class development bank in operation since 2012, with six branches alongside its head office in Khotang. Informerics Credit Rating has assigned a rating of ‘B’ to the bank, signalling a high-risk profile.