Stock Market Turns Red Despite NRB’s Policy Relief, Technical Patterns Signal Short-Term Weakness

Nepal Rastra Bank’s decision to reduce the risk weight on share-backed loans from 125% to 100% failed to uplift investor sentiment, as the NEPSE index closed in the red the following day. Although trading volume improved slightly, the market reflected caution rather than enthusiasm. The NRB, through its third quarterly monetary policy review, announced that loans above Rs. 5 million against shares will now carry a 100% risk weight — a provision previously applied only to loans below Rs. 5 million.

According to NRB data, over Rs. 124 billion has been disbursed in share mortgage loans, with commercial banks accounting for the largest share at Rs. 101.6 billion. Loans above Rs. 5 million now total Rs. 99.53 billion — up from Rs. 68 billion just nine months ago — suggesting growing institutional investor activity. Meanwhile, the average interest rate on such loans has dropped to 8.12%, with most loans now priced under 9%, making them attractive despite market underperformance.

Analysts believe political instability and policy uncertainty are clouding the market. Sunday’s protests by royalist groups and the opposition UML party created confusion, prompting investors to adopt a “wait and watch” approach. With the national budget announcement approaching, investors are holding off amid uncertainty about future regulations and taxes.

Investors have submitted several demands to the government and regulators, including treating capital gains as final tax, allowing margin lending via brokers, permitting private companies to raise funds through pre-IPO and crowdfunding routes, giving Non-Resident Nepalis (NRNs) stock market access, and offering tax exemptions on reinvestment and loss adjustments. Suggestions also include promoting the commodities market by improving warehousing and establishing a dedicated commodities exchange.

From a technical standpoint, the NEPSE index confirmed a death crossover on Monday, where the 50-day moving average crossed below the 200-day average — a bearish indicator signaling potential long-term correction. Recent candlestick patterns show repeated testing of the 2660–65 level, but analysts call this only a minor and unstable support. If this level is broken, pressure may shift to the 2590 zone. RSI readings suggest a neutral mode, but the lack of sustained buying and frequent profit booking by short-term traders reflects market hesitation.