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NEPSE Index Drops for Five Consecutive Days after Issuance of Monetary Policy

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NEPSE Index Drops for Five Consecutive Days after Issuance of Monetary Policy
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July 31: Since Nepal Rastra Bank announced the monetary policy for the current fiscal year (FY 2023/24), Nepal Stock Exchange (NEPSE) index has been falling on a daily basis except for Monday. After falling for five successive days since the announcement, NEPSE index increased marginally on Monday. Until Sunday, NEPSE decreased by 5.69 percent (126.81 points) to 2100 points before increasing by 5.84 points on Monday. The monetary policy mentioned about reviewing the existing risk weightage of 150 percent in share mortgage loans.

Investors estimated that the risk weightage will decrease regardless of the amount of share mortgage loan they take, causing an increase in the market when the monetary policy was unveiled last Sunday. However, Governor Mahaprasad Adhikari, in a press conference held after the release of the monetary policy, made it clear that only 100 percent risk weightage will be maintained for share mortgage loans up to Rs 5 million per person, which resulted in the decline in the secondary market transactions.

Some investors have been expressing through social media that they are not positive towards the idea.

Other investors argue that the monetary policy is good, but it is making investors suffer by spreading unnecessary confusion. On the day the monetary policy was announced, the NEPSE index rose 63 points to close at 2,227 points with Rs 4.37 billion worth shares transactions. After that, both NEPSE index and daily turnover declined.

Investors had good expectations through monetary policy. Before the announcement of the monetary policy, there was news that the average risk weight will be revised. The governor had also expressed the same intention from time to time. Likewise, liquidity in the financial system had eased with credit-deposit ratio (CD ratio) at 82 percent.

When the monetary policy was announced, it was said that 150 percent of the risk weightage of share mortgage loans would be revised. However, it did not happen accordingly. That is why the market decreased. Another reason is that traders book profits in rising markets. After making profits, traders buy shares only when the market comes down again. This is also the reason why the market was affected. Nothing else has a negative impact on the stock market. Now the listed companies have started publishing their fourth quarterly financial statements. Mutual funds have started declaring dividends. The stock market is expected to gradually return to its own rhythm.

 

 

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