Nepal’s capital market is once again in focus as the Nepal Stock Exchange (NEPSE) entered a correction phase after nearly a week of bullish momentum. On Monday, NEPSE dipped by 22.35 points, closing at 2,684.01, signaling a reversal in the recent uptrend that had added 110.59 points over six consecutive trading sessions.
This article presents a comprehensive analysis of the current Nepal share market scenario, NEPSE index performance, regulatory reforms, and new foreign investment openings—an essential read for investors, analysts, and policy observers alike.
🔻 NEPSE Correction Explained: Profit Booking, Fiscal Pressures, and Broker Settlements
The recent drop in the NEPSE index is widely attributed to short-term investors cashing out their gains, combined with the traditional Asar masanta pressure—a time when investors liquidate assets to pay capital gains taxes, interest on margin loans, and meet broker settlement obligations.
Moreover, the daily trading volume declined from Rs. 9.5 billion on Sunday to Rs. 8.37 billion on Monday, indicating a cooling in retail participation and cautious sentiment heading into the fiscal year-end.
📊 Sectoral Performance: Hydropower Loses Grip as Finance and Development Banks Slide
While hotel & tourism (+0.61%) and mutual funds (+0.07%) showed marginal gains, the broader market remained under pressure. Key sectors posted notable losses:
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Finance companies: -3.76%
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Development banks: -0.81%
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Commercial banks: -0.79%
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Hydropower stocks: -1.02%
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Microfinance: -0.70%
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Life insurance: -0.93%
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Non-life insurance: -0.66%
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Manufacturing: -1.24%
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Trading: -1.25%
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Investment group: -0.76%
Hydropower, once dominating over 70% of daily trading volume, has dropped to just 34.16%. Investors are reportedly rotating capital back into the sector after disappointing returns from finance and development bank stocks.
Top gainers included Mailung Khola Hydropower (+6.56%), while Rapti Hydro and General Construction hit a lower circuit. Nepal Reinsurance Company Ltd. topped the trading chart with transactions exceeding Rs. 807 million.
💸 Capital Market Reform: NRB Approves Perpetual Preference Shares for Banks
In a major policy shift, the Securities Board of Nepal (SEBON) has approved issuance of Perpetual Non-Cumulative Preference Shares by banks and financial institutions. The move aims to strengthen their Tier 1 Capital and resolve lending constraints caused by capital adequacy shortfalls.
Key Features:
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Par value: Rs. 100
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Limited to institutional founder shareholders
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Max 50 institutional investors per issuance
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Not tradable by the public or mutual funds
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Dividends only from current distributable profits
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Convertible or redeemable only per NRB provisions
This reform is expected to support long-term capital adequacy, enhance financial stability, and improve credit flow to productive sectors.
📈 Monetary Policy Direction: Coordination Between NRB and Planning Commission
Governor Dr. Bishwanath Paudel and NPC Vice Chair Dr. Shivraj Adhikari met to align monetary and fiscal policy ahead of the new fiscal year. Key discussion points included:
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Channeling idle liquidity in BFIs into national pride projects
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Increasing investment in productive sectors like agriculture, infrastructure, and manufacturing
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Tackling rising NPLs (non-performing loans)
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Improving financial literacy in Nepal
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Expanding bank branches while managing risk
NRB also confirmed that Nepal’s inclusion in the grey list was being actively addressed with AML/CFT compliance.
🌐 Foreign Investment in Nepal’s IT Sector and Overseas Expansion
In a landmark move, NRB has allowed Nepali IT companies to invest overseas using foreign exchange earned from service exports. Under the new rule:
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Up to 25% of annual IT export earnings can be reinvested abroad
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50% of foreign profit must be repatriated to Nepal
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Max cap: $1 million or 50% of average foreign income
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Sweat equity for Nepali IT professionals legalized
According to NAS-IT President Santosh Koirala, over 90,000 youths are currently employed in Nepal’s IT sector, generating annual revenues exceeding $800 million. This regulation is a major step toward globalizing Nepali startups and boosting digital exports.
🌍 Growing Foreign Interest: Malaysia, UK, and Germany Explore Investment in Nepal
Nepal is emerging as a hotspot for foreign investment. Key developments:
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Malaysia-Nepal Business Council met PM KP Oli to explore investment in waste recycling, IT parks, agriculture, and tourism.
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UK Ambassador and business leaders are encouraging British companies to outsource to Nepal’s IT industry and renewable energy sectors.
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Dolma Impact Fund founder Tim Gocher emphasized Nepal’s potential to build world-class data centers due to its cold climate and clean energy.
Nepal currently allows:
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100% foreign direct investment in IT
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7-year corporate tax holiday
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Full repatriation of profits
🏗️ Foreign Aid and Development Financing
While foreign aid decreased in 2080/81 to Rs. 137.28 billion, new frameworks have been introduced:
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The Foreign Aid Operational Policy 2082 promotes blended financing and public-private partnerships to mitigate financial risks.
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Aid remains crucial for poverty alleviation, infrastructure development, and employment generation.
🔚 Conclusion: Correction Is Temporary—Nepal’s Share Market Has Long-Term Upside
Despite the current dip in the Nepse Index, the foundation for a sustainable bullish market is being laid through:
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Monetary and fiscal coordination
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Capital strengthening in banking
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Foreign investment in IT and energy
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Regulatory modernization
Investors are urged to look beyond short-term volatility and focus on Nepal’s emerging sectors, fiscal reforms, and strategic FDI inflows for long-term gains.
