NEPSE dips slightly while turnover rises; Financial strategy flags credit gaps, report on NEPSE restructuring approved

Week in NEPSE: Jan 18-22

This week, NEPSE declined marginally by 0.56% compared to last week.

NEPSE started the week on a high note, opening at 2,772.17 on Sunday (Jan 25), extending its gains from the previous week’s close of 2,714.61. The index climbed to an inter-week high of 2,788.09 on Monday (Jan 26), with transaction value amounting to NRs 16.19 billion.

NEPSE price movement [Jan 18 - 22]

Mid-week, the index was pushed down, hitting a low of 2,702.56 on Wednesday (Jan 28), before recovering moderately to close at 2714.05 on Thursday. 

Turnover volume for the week amounted to NRs 70.36 billion, which previously closed at NRs 38.26 billion. This sharp rise reflects heightened trading activity and growing market confidence as election momentum grows. Some analysts suggest that the market is absorbing liquidity generated from election campaign spending.

Index highlights

As NEPSE ended in the red, its sensitive and float indices also declined, reflecting broad market weakness.

Most sectors ended the week in the red. Finance led the losses with a 3.31% drop, followed by Others (-3.27%), the development bank (-3.12%), and life insurance (-3.09%). Microfinance (-2.65%), manufacturing (-2.70%), non-life insurance (-2.72%), and investment also lost ground. The banking subindices slid 2.23%, and hotel and tourism fell 1.38%.

Sectoral highlights

Only mutual funds (+1.42%) and hydropower (+0.18%) posted moderate gains. This came in a week when several mutual fund schemes published their latest NAV report, pointing to relative stability in the segment.

Stock in focus: gainers and losers

This week saw gains spread across manufacturing, development banks, hydropower, and tourism companies.

On the gainer's side, the SY Panel Nepal (SYPNL) appeared as the top gainer on Sunday and Monday. Other manufacturing companies such as Shreenagar Agrofarm (SAIL), also posted gains.

Notable hydropower companies such as Ankhukhola Hydro (AKJCL) also featured among gainers on Wednesday and Thursday. Other hydropower, including Mountain Hydro Nepal (MHNL), Sanvi Energy (SANVI), People Power (PPL), Him Star Urja (HIMSTAR), also appeared as gainers. 

Other gainers include Nepal Microinsurance (NMIC), Bandipur Cablecar (BANDIPUR), Saptakoshi Development Bank (SAPDBL), Corporate Development Bank (CORBL), and others.

Stock gainers and losers

On the losing side, 12% Goodwill Finance Limited Debenture (GWFD83), Narayani Development Bank (NABBC), and RBB Focus 40 (RBBF40) appeared among the decliners on Thursday and Friday. Other notable losers include Sanima Growth Fund (SAGF), Himalayan Power Partner Limited (HPPL), Laxmi Unnati Kosh (LUK), Om Megashree Pharmaceuticals (OMPL), and others.

Market watch: News, policies, and listing

Government targets 7.5% GDP contribution in new financial strategy

The government has introduced its Second Financial Sector Development Strategy, setting a five-year goal to boost the financial sector’s share of GDP to 7.5%. The strategy, set to run through fiscal year 2029/30, focuses on enhancing the performance and resilience of banks, insurance companies, capital markets, cooperatives, and non-banking financial institutions.

Banking Sector: It also includes mobilising resources through instruments like green bonds and enhancing financial infrastructure, transparency, risk management, and consumer protection. Key initiatives include strengthening the Credit Information Center, introducing credit scoring, improving the Deposit and Credit Guarantee Fund, and addressing non-performing loans through an asset management company.

Additionally, the strategy outlines plans to draft legislation for establishing an asset management company, identify systematically important banks, and curb banking-sector-targeted criminal activities while reducing cyber risks. It also includes developing a Financial Stability Index to monitor financial stability and implementing measures to strengthen and grow a resilient financial sector.

Insurance Sector: Coverage is targeted to expand to 60% of the population by introducing simple, affordable insurance products for low-income groups, property insurance against disasters, and promoting green and social bonds. Regulatory and risk management capacities of the Nepal Insurance Authority and reinsurance companies will be strengthened.

Capital Market: The strategy seeks to mobilise development financing through derivatives, bonds, mutual funds, index funds, and green bonds, alongside full dematerialisation of financial instruments and automated secondary market trading. New laws for securities, commodity exchanges, and financial trusts are also proposed.

Cooperatives and Non-Banking Sector: Legal reforms and stricter registration criteria are planned to address governance issues in cooperatives. Non-banking institutions, including the Employees Provident Fund, Citizen Investment Trust, and Social Security Fund, will be strengthened as long-term investment and social protection pillars, with enhanced risk-based capital frameworks and governance reforms.

The report warns that banks are sitting on excess liquidity while lending remains limited and concentrated. Rising deposits have not translated into broader credit access, especially for the productive sector. Meanwhile, the plan targets increasing agricultural credit from 12.84% to 15% of total lending and tripling electronic transactions via digital platforms. 

Loan recovery post-COVID remains weak, pushing non-performing loans and non-earning assets upward. Branch expansion covers all local governments, but poor infrastructure and scattered settlements keep rural credit shallow.

Technology provides reach but poses cyber threats. While large and systematically important banks remain under-supervised. The strategy calls for stronger regulation, integrated monitoring, and the creation of a Financial Stability Index. Laws for asset management companies (AMCs), and cybercrime control are also planned.

Government approves NEPSE restructuring, plans 25% share for strategic partners

The government has accepted the report on restructuring the Nepal Stock Exchange (NEPSE), prepared by a five-member committee led by Chartered Accountant Prakash Jung Thapa. 

The report calls for increasing NEPSE's paid-up capital to NRs three billion through bonus shares, right shares, or selling new shares at a premium. Bonus shares are suggested as an immediate step, while new shares could attract investors and support service expansion.

Under the proposed ownership structure, 25% of NEPSE shares would go to a strategic partner, reducing government ownership to 15.73%, while banks and insurance companies would hold 43.66%, and the public 15%.

NEPSE's current paid-up capital is  NPR 1 billion, with the government holding 58.66%, Rastriya Banijya Bank 11.23%, Employees Provident Fund 10%, Nepal Rastra Bank 9.5%, and Laxmi Sunrise Bank and Prabhu Bank 5% each.

The report also highlights governance reforms, including the dissolution of the current board and the formation of a new professional board with independent experts. It emphasises strengthening human resources, decision-making processes, technology, and institutional governance, aiming to transform NEPSE into a modern capital market institution.

India allocates an INR eight billion grant to Nepal in the 2026/27 budget

India has pledged INR eight billion (NRs 12.8 billion) in grants to Nepal for the fiscal year 2026/27, matching last year’s allocation. The announcement came in the federal budget presented on Sunday by the Finance Minister Nirmala Sitaraman.

Other allocations include INR 2,288.56 crore to Bhutan, INR 550 crore to the Maldives and Mauritius, INR 400 crore to Sri Lanka, INR 300 crore to Myanmar, INR 150 crore to Afghanistan, and INR 60 crore to Bangladesh.

These grants are intended to support development projects, humanitarian initiatives, and bilateral cooperation. Among India’s neighbors, Nepal remains one of the largest recipients.

NMB to issue ‘Perpetual Non-cumulative Preferential Share.’

Following the similar issuance by Nabil Bank and Kamana Sewa Bikas Bank, the Securities Board of Nepal (SEBON) has approved the issuance of Perpetual Non-Cumulative Preferential Shares for NMB Bank. 

SEBON has approved NMB Bank to issue 30 million units of Perpetual Non-Cumulative Preferential Shares at the face value of NRs 100 per unit, amounting to NRs 3 billion, with a fixed dividend rate of 8.25%. This issuance is another addition to the list of perpetual non-cumulative preferential instruments in Nepal’s capital market. 

Trading spotlight: IPO and listed companies

Bhujung Hydropower opened its Initial Public Offering (IPO) to the general public on January 26, offering 830 thousand shares worth NRs 83 million. The application period runs until January 29. Kumari Capital is managing the issue.

The IPO funds the 7.5 MW Upper Midim Hydropower Project, with a total estimated cost of NRs 1.8 billion. ICRA Nepal has assigned an ICRA NP issuer rating of BB+, indicating moderate risk for investors.