Anticipating NRB’s move, Nepse surged by 44 points

With news of Nepal Rastra Bank (NRB) lifting the Rs 120m cap on margin lending doing the rounds, the stock market saw a 44.34-point surge on Thursday.

Investors are expecting a relaxation of the margin lending provision by the central bank after the meeting of the financial sector high-level coordination committee on Tuesday.

The daily turnover at the Nepal Stock Exchange (Nepse) also rose to almost two months high with total turnover reaching Rs 3.29bn on Thursday. 

Along with the daily turnover, the Nepse also saw a surge in volume. The number of shares traded also hit a two-month high. A total of 11.26m units of shares were traded on Thursday. The last time, the volume was higher than that of Thursday, was on July 24 when 20.97m shares were traded. 

The domestic stock market has been on a downward spiral after the central bank unveiled a new monetary policy in the last week of July, with the Nepse index down by more than 190 points. 

Of late, the central bank is under tremendous pressure on the NRB to lift the Rs 120m cap. The private sector, stock investors, and Finance Minister Prakash Sharan Mahat himself have been urging Governor Maha Prasad Adhikari to review margin lending provisions. Finance Minister Mahat, during Tuesday’s meeting, asked Governor Adhikari to facilitate the stock market to increase economic activities. 

Finance Minister Mahat and Governor Adhikari had also met on Monday in which discussion was centered on adopting some flexibility in monetary policy to increase economic activities.

While the stock investors were hoping that the central bank through monetary policy 2023/24 would relax the margin lending provisions, the central bank only reduced the risk weightage on margin loans. That too for marginal loans up to Rs 5m only. The NRB reduced the risk weightage of margin loans up to Rs 5m from 150 percent to 100 percent. However, the risk weightage of margin loans above Rs 5m remained untouched by the NRB.