KATHMANDU, May 10: A total of Rs 7.92 billion in market capitalization was wiped off from the share market Thursday as the Nepal Stock Exchange (Nepse) index fell two percent to end at 411.39 points. The stock market took a dip as share prices of commercial banks and a trading firm dropped due to selling pressure.
The market, which started retreating from Wednesday, was on a downward spiral from the opening hour on Thursday. By 12:32 pm, it had fallen by three percent. This tripped the circuit breaker and trading was halted for 15 minutes.
It is a norm at the stock market to clamp the circuit breaker if the index rises or falls by three percent in the first trading hour from 12 noon to 1 pm. This is done to protect the market from negative effects of sudden upward or downward movement in share prices.
After the trading resumed, the market started making some gains but fell short of recouping the loss made in the early trading hour.
Thursday´s stock market fall was triggered by drop in share prices of major commercial banks like Standard Chartered, Nabil, Himalayan and Nepal Investment. Standard Chartered Bank, which had lost Rs 100 in Wednesday´s trading, shed another Rs 50 on Thursday to end at Rs 2,050. Nabil shares also fell by Rs 39 to end settle at Rs 1,420, while stocks of Himalayan Bank and Nepal Investment Bank dipped Rs 41 and Rs 31, respectively, to settle at Rs 725 and Rs Rs 568.
“The stock prices of these banks fell after investors decided to offload shares with profit taking motive,” a senior Nepse official told Republica on condition of anonymity, calling it a “regular buying and selling cycle”.
Thursday also saw shares of Bishar Bazar Company taking 83-rupee dip, which pulled down stock price of the mall operator to Rs 2,017. This caused the trading sub-index to fall by 3.57 percent. Among others, share price of stock market heavyweight Nepal Telecom fell by Rs 5 to end at Rs 495.
Experts say that one of the downsides of the domestic share market is that it is crowded with investors who make decisions based on decisions taken by their peers. “Because of this when share prices start falling one can´t find any buyer and when share price starts rising one can´t find any sellers,” Srijesh Ghimire, CEO of NMB Capital, said. In other words, investments are mostly made solely on the basis of speculation. This is a trait among many stock market investors throughout the world, but in our country this has started going beyond limit.
“Market will continue to remain volatile unless investors start investing based on strenghts of a company which can be evaluated through price to earnings ratio, dividend distribution rate and management and board compositions,” Ghimire said.