Significant Surge in Nepal Stock Exchange (NEPSE)

The Nepal Stock Exchange (NEPSE) has recently experienced a remarkable surge in the stock market. On the first day following the announcement of the monetary policy, the NEPSE index rose by 113.42 points, reaching 2,681.56 points. On this day, more than NPR 15.81 billion worth of shares were traded.

Increase Across All Sectors Except Microfinance

All sector indices except for microfinance have increased, with the commercial banking sector seeing a 9.89% rise. Most commercial banks' share prices traded at positive circuit levels. Investors are highly enthusiastic, considering the monetary policy to be flexible, accommodative, and investment-friendly.

Role of Institutional Investors

After removing the NPR 200 million cap on institutional investors' loans, the stock market has seen increased activity. Especially, shares of fundamentally strong companies are expected to trade more actively. The surge in the banking sector on Sunday can be attributed to the central bank's policy, which removed various constraints that hindered banks' profit growth.

Rise in the Banking Sector

On this day, the share prices of the banking sector saw significant increases. The NEPSE experienced positive circuit breakers twice intraday, largely due to the contributions from the banking sector.

Central Bank Policy

The central bank's policy aims to reduce banks' non-performing loan ratios and increase profits. Despite the reduction in the number of banks due to mergers, the monetary policy has provided banks with the facility to showcase their interest income in their balance sheets and distribute dividends accordingly. This is expected to increase banks' profits and subsequently their dividends.

Total Transactions

On this day, over 40 million shares of 318 companies were traded. Kumari Bank led the transactions with over NPR 360 million, followed by NIC Asia Bank and Himalayan Reinsurance in second and third place, respectively.

Analysis

The main reason for this surge is the flexibility and investment-friendly approach of the monetary policy. The focus on the banking sector has attracted general investors towards banking shares. The increase in share prices of fundamentally strong companies and the interest of institutional investors have also helped stabilize the market.

Thus, the significant rise in the NEPSE index and the surge in banking sector share prices on the first day following the announcement of the monetary policy have excited investors. Such policy changes are likely to have a positive impact on the market in the future as well.