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The Nepal Stock Exchange (Nepse) index has been enduring a prolonged period of decline over the past two years.

The benchmark index soared to an all-time high of 3,198.60 points on 18 Aug 2021. But now, two years later, the Nepse index languishes below the 1,900-point threshold. Daily transactions on the exchange reached Rs 21.64bn on that record-breaking day in August 2021. It plummeted to just above Rs 1bn as of Tuesday. Moreover, the total market capitalization—the total worth of shares listed on the secondary market—has declined from Rs 4.46trn in Aug 2021 to slightly over Rs 1trn on Tuesday. This substantial decrease equates to a loss of Rs 3.5trn in the value of listed shares over just two years, resulting in significant losses for investors.

However, it’s not just investors who have suffered losses; government revenue from the stock market has also seen a considerable drop during this period. According to data from CDS and Clearing Limited, the government collected Rs 14.13bn through capital gains tax (CGT) on share transactions in 2020/21. Such collection decreased to Rs 10.35bn in 2021/22 and further to a mere Rs 2.97bn in 2022/23. The government levies a CGT of 5 percent on profits from shares held for more than a year and 7.5 percent on those held for less than a year. The rates for institutional investors go as high as 10 percent.

Data provided by CDS & Clearing Ltd shows the government’s CGT revenue from share transactions grew from Rs 500.76m in 2017/18 to Rs 61.2m in 2018/19 and reached Rs 98.52bn in 2019/20. During the bull market, rising share prices led to increased investor profits, resulting in higher CGT revenue. However, with most investors now facing losses on share transactions, CGT revenue collection has suffered.

The benchmark Nepse index has been on a consistent downward trajectory since reaching its all-time high of 3,198.60 points on 18 Aug 2021. According to the stock investors, the stock market is not reviving because of the central bank's policy of capping mortgage loans. In the Monetary Policy for Fiscal Year 2022/23, the central bank said that investors could avail margin loans of up to a maximum of Rs 40m from one financial institution and Rs 120m in total. This provision compelled investors to settle loans exceeding the new ceiling, creating selling pressure on the market. This ultimately caused the stock market decline.

Although the central bank has recently relaxed this provision, allowing investors to avail margin loans of up to Rs 150m and institutions to avail loans of up to Rs 200m, it has failed to boost investor confidence. Market participants are advocating for the complete removal of the loan cap altogether.

In a clear indication of liquidity surplus in the banking system, most commercial banks have reduced interest rates on deposits for the month of Kartik, which begins on Wednesday.

As banks are flush with loanable funds, interbank lending rates have fallen below two percent. Taking advantage of these low rates and to absorb liquidity in the banking system, the government has increased domestic borrowing. It has already raised the debt it had targeted to raise in the second quarter.

The government has set a target of raising Rs 240bn internal domestic debt in the current fiscal year. Out of this amount, the central bank has already secured Rs 87.31bn. This includes Rs 35bn that the central bank had initially planned to raise in the second quarter, according to the Monetary Management Department of the NRB.

Out of the 20 commercial banks in operation, 13 have reduced interest rates on individual fixed deposits, while four have maintained the same interest rates as the previous month. Meanwhile, three have increased their interest rates.

Nepal SBI Bank, NMB Bank, and NIC Asia have raised interest rates on deposits due to pressure on their credit-deposit ratios.

Himalayan Bank, NIC Asia Bank, and NMB Bank will offer the highest interest rate of 11.003 percent on individual fixed deposits. In Ashwin, from mid-September to mid-October, Himalayan offered an interest rate of 11.054 percent, while NIC Asia and NMB Bank offered 10.896 percent and 9.99 percent, respectively.

On the other hand, Standard Chartered Bank will offer the lowest interest rate at 9.22 percent on individual fixed deposits. Likewise, Everest Bank, Prabhu Bank, Sanima Bank, and Nepal Bank Ltd will offer an interest rate of 9.224 percent, while Rastriya Banijya Bank Ltd will offer 9.5 percent, Agricultural Development Bank will offer 9.76 percent, and Citizens Bank Ltd will offer 9.95 percent interest on individual fixed deposits.

Similarly, Siddhartha Bank Ltd and Machhapuchchhre are maintaining the same interest rates as last month, which is 9.99 percent.

Nepal Rastra Bank (NRB) allows banks and financial institutions to adjust their interest rates by a maximum of 10 percent each month.

Similarly, interest rate on institutional fixed deposits should be two percentage points lower than interest rate on individual fixed deposits.

The Nepal Stock Exchange (NEPSE) gained 43.27 points to close at 1,907.89 points on Wednesday.

Similarly, the sensitive index surged by 8.14 points to close at 366. 97 points.

A total of 3,772,023-unit shares of 286 companies were traded for Rs 934 billion.

Meanwhile, Asha Laghubitta Bittiya Sanstha Ltd was the top gainer today, with its price surging by 10. 00 percent. Similarly, BPW Laghubitta Bittiya Sanstha Limited was the top loser as its price fell by 4.62 percent.

At the end of the day, total market capitalization stood at Rs 2. 92 trillion.

The price of gold has increased by Rs 1,300 per tola in the domestic market on Wednesday.

According to the Federation of Nepal Gold and Silver Dealers’ Association, the precious yellow metal is being traded at Rs 113, 200 per tola today. It was traded at Rs 111, 900 per tola on Tuesday.

Meanwhile, tejabi gold is being traded at Rs 112, 650 per tola. It was traded at Rs 111, 350 per tola.

Similarly, the silver is being traded at Rs 1,375 per tola today.