Increasing bank rates make Nepse less attractive

Increasing interest rates, over supply and margin call made investors lose confidence in the domestic capital market, making it lose its charm.
The one-year fixed deposit interest rate has gone up in the almost equal per cent compared to the Nepse's downfall.

The one-year fixed deposit interest rate has gone up by 65 per cent from 5.23 per cent in September 2008 to 8.64 per cent this September, according to a renowned market analyst Rabindra Bhattarai.

Similarly, the market has plunged to 404.43 points from 976 points in last two years. "In the last two years, the Nepse has also dropped by 68 per cent pulling the market capitalisation to around Rs 350 billion from Rs 500 billion," he said, adding that the number of shares has also nearly doubled due to rightsd shares and number of listed companies increase.

There were 144 listed companies in September 2008 and this September it reached 180 that is an increase of 25 per cent. Similalry, the exceeding supply of stock in comparison to demand is also reason for index not being able to perform well. Likewise, the stock market cycle that had inflated the stock values abnormally pushing Nepse index is itself deflating the prices of those overvalued stocks which is also bring down the index.

Meanwhile, this week too bearish trend continued as the week saw Nepse plunging deeper to 392.04 points. Nepse went further down by 6.84 points from a week ago to close at 398.14 points.

Last Sunday morning, the market opened at 398.14 points and on Friday it closed at 392.04 points.

According to Bhattarai, the new benchmark could be around 350 points and lower as by the mid-January, the investors get the margin call from the banks, they have taken loans against the shares as collateral leaving them with no option but to sell their stocks that will pull the Nepse further down.

Nepse observed transaction worth Rs 127 million through 7,085 transaction of 483,317 unit shares of 111 companies during the last week. The transaction amount has increased by 14.65 per cent compared to a week ago. The sensitive index -- that measures the Class A listed companies’ index -- also went down by 1.59 points. While float index -- that represents only tradable shares -- has also dipped by 0.85 points.

Manufacturing, hotels and others sub group ended up in green zone as Unilever Nepal, Soaltee Hotel and Nepal Telecom were able to earn throughout the trading week. Similarly, insurance companies, development banks, hydropower and commercial banks, finance companies and trading subgroup lost.

Bank of Kathmandu topped the chart in terms of transaction amount with the transactions worth Rs 15.7 million and in terms of number of shares traded Patan Finance was the forerunner with 48,814 shares changing hand and in terms of number of transactions Zenith Finance topped with 825 transactions.

The week’s top five performers in terms of transaction amount was Bank of Kathmandu (Rs 15.77 million), Nepal Investment Bank (Rs 9.25 million), Nepal SBI Bank (Rs 8.21 million),Nabil Bank (Rs 6.64 million) and Himchuli Bikas Bank (Rs 6.22 million).

Almost all of the major commercial banks lost throughout last week resulting in commercial banks subgroup losing 12.33 points but today -- the first day of the week -- the commercial banks gained a marginal 0.56 point to close the sub group at 346.62 points, though it could not push the Nepse up that ended at losing 1.06 points to close the day's trading at 390.98 points.