This is the only second time in Nepse's history that the benchmark index has crossed the 1,100-point mark.Though the market was on course to cross the 1,100-point mark last year, the benchmark index stated taking a dive after the Nepal Rastra Bank (NRB) introduced a 1 percent cap on 'held-for-trading' investment for the bank and financial institutions (BFIs).
The market bounced back to the four-digit level after the central regulatory bank, through the Monetary Policy for 2015/16, announced a new provision for the bank and financial institutions that requires them to increase their paid-up capital by four times.
Stock analysts say Nepse index will shatter the all-time-high record of 1175.38 points if the buoyant mood in the secondary market sustains for few days.
Nepse had plunged to a record low of 292.31 points on June 15, 2011 after climbing to the record high of 1,175.38 points on August 31, 2008. The second Constituent Assembly (CA) polls that gave a thumping victory to parties advocating open market policy had pushed up the market again. However, it eventually plunged after a new provision was introduced for 'held-for-trading' which investors understood as the central bank's move to curb the growing market.
"Earlier immediate correction would follow whenever the market goes up. However, we are not seeing much correction this time," Anjan Raj Poudyal, former president of Stock Brokers Association of Nepal (SBAN), told Republica. "If the current trend continues, Nepse will set a new record very soon."
According to analysts, the central bank's decision to raise minimum paid-up capital for BFIs has given a shot in the arm for the stocks. The benchmark index has logged gains up 148.78 points since the unveiling of the Monetary Policy on July 24. "Investors are on a buying spree amid expectations that the capital-starved BFIs will issue bonus shares instead of cash dividend as well as rights shares to boost their paid-up capital," Narendra Sijapati, another former president of SBAN, told Republica. "Recent political developments have made investors hopeful that a new constitution will be promulgated soon. Similarly, liquidity surplus in the banking system is the other factor that has pushed the market up."
Rise in the sub-indices of 'Others' group that include Nepal Telecom and Banking, the heavyweight trading group in the stock market, lifted the overall market on Sunday. Their sub-indices surged by 39.94 points and 32.74 points, respectively, to settle at 769.51 points and 1,054.13 points.
Daily turnover also increased significantly on Sunday. A total of 1.6 million units of shares of 134 companies worth Rs 988.95 million were traded in the market on the day through 6,519 transactions.
TRADING OF BANK STOCKS IN DEMAT FORM ONLY
CDS and Clearing Ltd (CDSCL) said shares of commercial banks will be traded in only demat form from Monday.
Issuing a statement, CDSCL said transactions of stocks of 31 companies, including 22 commercial banks, will be conducted only in dematerialized form.
Though CDSCL has long been planning to fully replace the paper-based trading with the dematerialized form for the last four years, it hasn't materialized due to delay by listed companies to register with CDSCL and lack of awareness among investors.
The CDSCL has embraced a strategy to implement the dematerialized form of trading in a phase-wise manner. According to CDSCL, only 106 companies out of 230 have registered themselves with the CDSCL for dematerialization of their shares. Though there will be no paper-based trading of the banking and other nine companies in the secondary market from Monday, most of the investors are yet to open their demat account. Though there more than 100,000 investors, only 51,247 have opened their demat accounts as of Sunday, according to CDSCL.
The restriction in paper-based trading of these companies is likely to shoot up the benchmark index further, according to stock analysts. "Since stocks of these companies are among the most traded in the secondary market, there will be supply side constraint as many investors who own these shares are yet to get demat account. The shortage in the supply can push share prices of these companies which will eventually lift the benchmark index," said Anjan Raj Poudyal, former president of Stock Brokers Association of Nepal, said.
Related story
Nepse marginally lower in week after last session recovery
-1200x560-1779450784.webp)
