NEPSE falls sharply despite last week’s optimism over new government

The first trading day after the formation of the Balen Shah government witnessed a sharp decline on Sunday, as investors reacted to emerging political developments with caution instead of optimism.

The benchmark NEPSE index dropped by 71.05 points to close at 2,879.11, continuing a downward trend throughout the trading day.

Trading activity, however, remained strong. Shares of 333 companies were traded, totaling 35.24 million units through 196,158 transactions, with a turnover exceeding NRs 15.03 billion.

Out of the traded companies, share prices of 255 scrips declined, while only 10 advanced. All sector indices posted losses, led by the finance sector, which fell by 3.38%. 

Reliance Spinning Mills, Super Khudi Hydropower, and Ridgeline Hydropower Energy were among the few stocks hitting the upper circuit limit. Meanwhile, Uniq Nepal Laghubitta Financial Institution recorded the biggest drop, falling 6.17%.

The decline comes after weeks of market gains driven by optimism following the parliamentary elections, where the Rastriya Swatantra Party secured a strong majority, raising hopes for government and political stability and economic reforms. The NEPSE had risen from 2,712 points on February 19 to 2,950 points by March 13, just before the new government took office.

However, investor sentiment appears to have weakened following recent political developments with the appointment of controversial Sudan Gurung as Home Minister on Friday, followed by the arrest of former Prime Minister KP Sharma Oli and former Home Minister Ramesh Lekhak on Saturday. The arrest sparked protests by CPN-UML supporters, raising concerns about potential instability. This happened despite Swarnim Wagle’s appointment as Finance Minister, whom many investors have been rooting for, and the ministry’s decision to scrap 15 laws that the private sector deems unfriendly. 

Market analysts say the drop reflects investor caution amid these developments. While they view the latest decisions by the new administration as business-friendly, such as the appointment of Swarnim Wagle as finance minister and the ministry’s decision to repeal 15 laws considered unfriendly to the private sector, fears of political unrest and perceived arbitrary actions by the Home Ministry have weighed on the market.

Experts suggest that the current downturn may be temporary, noting that overall economic indicators and long-term market fundamentals remain positive.