Nepalese stock market witnessed a topsy-turvy move in 2010. The broader index opened at 548.11 on 1/3/2010 (first day of trading of 2010) and closed at 404.18 on 12/28/2010 losing by 26.26% year on year. This clearly explained the investors’ mood in 2010. Some of the notable reasons which barred NEPSE from advancing on a positive note were as follows.

1. Lack of political stability.
2. Constraint imposed by Nepal Rastra Bank on margin lending.
3. Small investors finding depositing money at banks better than investing in secondary market due to good deposit rates offered by banks and financial institutions.
4. Lack of sizeable number of institutional players in the market.
5. Increasing interest rates making it difficult for big and risk taking investors to borrow money and invest in stock market.

Will the same gloomy mood remain in 2011?

If the above mentioned points remain dominant in 2011, we can safely expect Nepse to go below 300. But with the following provisions, in the offing, we can definitely expect capital market to move through greener pasture in 2011.

1. Initiative of SEBON to establish Central Depository System (CDS). This system, when fully functional, will allow investors/traders to buy/sell shares and transfer ownership electronically thus getting rid of the hassle to physically settle or collect share certificates. Even the investors outside of Kathmandu can enjoy this facility.  Hence, via CDS we can expect increase in participants as buying/selling of shares becomes efficient and easy.
2. Provisions allowing interested parties to establish Mutual Funds will help bring much needed institutional players to the capital market.
3. In addition to Mutual Funds, Portfolio Management Companies are also expected to help grow the capital market.
4. The budget for 2067/68 has a policy to allow Non-Resident Nepalese to invest in Nepalese stock market. This will definitely help increase the volume in the market.
5. Last but not the least, NRB easing the constraint, as suggested by Governor Yubraj Khatiwada, over Margin Lending will encourage investors to take loan against shares to invest in capital market.

But amidst all these, if there is one point you would want us to pick, which would pave way for a greater 2011, it is improved and stable political situation in Nepal. Healthy political environment is imperative for stock market to grow and prosper. If political parties fail to reconcile before it is too late, no matter what sort of policies the Government brings, stock market will find hard to sustain.

Following are some of the noteworthy observations from 2010.

Major Highlights

Total No. Of Trading Days: 227
Year End Market Cap: Rs 350,393.12 mil
Year End Float Market Cap: Rs 80,247.37 mil

Total Yearly Turnover: Rs 7085.02 mil
Avg Turnover in 2010: Rs 31.21 mil

Total Yearly Volume: 21.74 mil
Avg Volume in 2010: 95,765

Total Yearly Transactions: 0.23 mil
Avg Transactions in 2010: 1012

Indexes' Performance:

Stock (inclusive of Promoters shares)
Total stocks with zero or positive change (Advances) in 2010: 51
Total stocks with negative change (Declines) in 2010: 162

2010 Top 5 Leaders

2010 Top 5 Laggards

How did the stocks fare in 2010?