Stock market jumps on election outcome

Nepal’s stock market rallied sharply on Monday after the parliamentary election results indicated a majority victory for the Rastriya Swatantra Party (RSP), lifting investor sentiment. Trading was suspended after the market hit its third consecutive positive circuit breaker.

The Nepal Stock Exchange (NEPSE) index surged by 6%, climbing 162.39 points to reach 2,875.43. This is the highest level recorded by the market in the past seven months. The index was last higher on July 31, when it stood at 2,922 points.

The market had remained subdued in recent months due to political uncertainty. After the September events, which saw massive disruption in the country, the political environment had become unstable, adding volatility to the market. The prospect of a stable majority government now following the election has boosted investor confidence.

“With the new mandate pointing toward a nearly two-thirds majority government, investors expect long-term policy stability. That expectation has driven the market upward,” said a buoyed investor.

“Today’s rise is normal, but because trading volume was low, supply may come into the market tomorrow. However, the market still appears strong. He anticipated the market to cross 3200, further adding “It will reach a new high in the coming days.”

The House of Representatives election was held peacefully on March 5 under an interim government led by former Chief Justice Sushila Karki. Results from the first-past-the-post voting system have already been announced. Out of 165 directly elected seats, the RSP has won 124 and is leading in one more constituency.

In the proportional representation vote, the RSP has already secured about four million votes. A party needs at least 138 seats in the House of Representatives to form a majority government, and projections suggest the RSP could reach two-third majority in the 275 member house.

The party has already nominated Balen Shah as its candidate for prime minister, and he is expected to lead the new government.

In previous elections, no single party secured a majority, leading to coalition governments and prolonged political instability. That uncertainty affected several sectors of the economy, including the stock market.

Investors are now hopeful that a single-party government with a five-year mandate will create a more stable investment environment. The current market surge reflects that optimism.

The rally reflects improved political sentiment as the latest election results appear to have ended that uncertainty. 

Political developments have often influenced the stock market. In July 2024, the two leading parties, the Nepali Congress and the CPN (UML) forged an agreement to lead the government for the next 3.6 years. The probability that there will finally be political stability for the next three and half years was a fair reason to bolster investors’ confidence in the market.

In a matter of 30 days the_farsight tracked, the market increased by 760.40 points from 2,240.41 points on 15 July. The total turnover was NRs 422.17 billion averaging at NRs 18.36 billion daily, but as investor enthusiasm faded with lack of long-form reforms, the NEPSE index eventually fell to around 2,400 points.