NEPSE and Macroeconomics: Eight-Month Data Analysis (2025/26)
Nepal's stock market (NEPSE) operates within a macroeconomic context that shapes investor returns. The NRB's 8-month data for FY 2025/26 provides a comprehensive framework for analyzing NEPSE's performance against economic fundamentals.
NEPSE Key Indicators (Mid-March Comparison)
| Indicator | Mar 2024 | Mar 2025 | Mar 2026 | YoY Change |
|---|---|---|---|---|
| NEPSE Index | 2,108.73 | 2,736.49 | 2,820.45 | +3.07% |
| Sensitive Index | 374.65 | 459.03 | 486.39 | +5.96% |
| Banking Sub-Index | 1,129.38 | 1,389.98 | 1,484.58 | +6.81% |
| Market Cap (Rs. M) | 3,314,630 | 4,543,812 | 4,744,734 | +4.42% |
| 12-Month Turnover (Rs. M) | 107,076 | 330,653 | 102,260 | -69.07% |
| Listed Companies | 271 | 268 | 286 | +6.72% |
| Market Cap/GDP (%) | 61.76% | 79.59% | 77.69% | -1.90pp |
Macro Context for NEPSE
| Macro Factor | Status | Impact on NEPSE |
|---|---|---|
| GDP Growth: 3.99% | Improving | Positive — corporate earnings grow |
| Inflation: 3.62% | Rising | Mixed — erodes real returns |
| Lending Rate: 8.40% | Rising | Negative — higher discount rate |
| Deposit Rate: 4.54% | Rising | Negative — deposits compete with equities |
| Remittances: +37.67% | Strong | Positive — household wealth effect |
| NPR/USD: 147.94 | Weakening | Mixed — import costs up, remittance income up |
Key Takeaways
1. NEPSE gained modestly (+3.07%) after a strong 2024/25 (+29.77%). The index is consolidating near 2,800 after the previous year's rally.
2. Turnover collapsed -69.07%: 12-month turnover fell from Rs. 330,653M to Rs. 102,260M — suggesting significantly reduced trading activity and investor participation.
3. Rising rates are a headwind: With lending rates at 8.40% and deposit rates at 4.54%, the opportunity cost of equity investment has increased.
4. Market Cap/GDP still elevated at 77.69%: While down from 79.59%, this ratio remains historically high for Nepal, suggesting the market is not cheap relative to the economy.
Conclusion
NEPSE's modest 3.07% gain in a year of rising rates and falling turnover reflects a market in consolidation. The macro backdrop is mixed — strong remittances and GDP growth support corporate fundamentals, but rising interest rates and reduced liquidity flow into equities are constraining valuations.