This paper provides an overview analysis of the Nepalese stock market with a focus on its Position, Performance, Problems, and Prospects. The study finds that the number of listed companies, traded companies, and shares traded have generally been on an increasing trend, except for a dip in 2001/02 and 2002/03. Commercial banks play a significant role in the Nepalese stock market, with their shares having high liquidity and marketability. The market capitalization has been increasing satisfactorily, and turnover on market capitalization is also on an upward trend. However, the NEPSE index has not been growing at a good pace and remains volatile due to the rumor-based characteristics of the market.
The study also reveals that the growth rate of the national GDP was better than the growth rate of the NEPSE index in the initial four years, but the last three years have seen the growth rate of the NEPSE index surpassing that of national GDP. Despite this, the study finds that SEBON, NEPSE, and the office of the company's registrar are insufficient in their responsibilities, and their acts, regulations, laws, and guidelines need to be improved to enhance their effectiveness.
Additionally, the study indicates that the current status of information in the market is not satisfactory, and investors lack awareness about the financial position of the market, leading to low confidence in Nepalese stock market investments. The market size in terms of market capitalization and the number of issues is relatively small, and the market for corporate debt instruments is underdeveloped. Retail investors dominate the market in the absence of foreign investors and local institutional investors. There is a need for Nepalese stock market expansion to other regions, and foreign investors should be allowed to participate to boost the market's transparency, openness, and liquidity.
The study concludes that the development of the Nepalese stock market has not been satisfactory, but there is enough long-term liquidity in the market, and investors are in search of investment opportunities in the equity of corporate bodies. The stock market has a good prospect for resource mobilization to finance productive enterprises in the Nepalese economy. However, urgent needs such as transparency, openness of transactions, quality professional services, adequate corporate financial disclosures, and supervisory frameworks must be addressed by the government to encourage individual investors' participation and sustain stock market development.Fullscreen Mode