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Market Analysis
NEPSE mirrors woes of economy

By R.K.Regmee

R.K.RegmeeThe behaviour of Nepal Stock Exchange in the past week has well mirrored the woes of economy in its Index which witnessed a steep fall from 405.20 points to 397.46. Investors found no point in trusting the market, explain analysts worrying continuity of decline in future.

Finance Minister Bharat Mohan Adhikari and his mentor Prime Minister Jhala Nath Khanal could not pump confidence into the ailing economy in their opening days in Singha Durbar. No where in their public rhetoric over the past few weeks did they indicate promptness to encourage investors.

Advisors may have failed to promptly encourage the new government leaders to come out with a sort of commitment to make efforts to be responsive to the economic woes facing people and the nation. They appear also lost in alerting Khanal and Adhikari about the adverse impact that the return of a large number of Nepali workers from some countries in the Middle East
would have on remittance –receipt in future. Nepal Rastra Bank caution to this effect is still being awaited.

Financially, past week's poor performance in NEPSE yard – fall by 2.62 % or 7.69 points and loss in turnover amounting to 4.89 % - could be termed as a statement on the worrying picture of Nepali economy during the first six months of the current fiscal year 2010-11 when most economic indicators went negative.

Grim scenario

Official statistics published recently show: there is imbalance between bank deposit and their loan and investment with the former increasing just by Rs. 3.78 billion as against the rise of loan to the tune of Rs. 45.93 billion. This has complicated the already imbalanced position between loan and deposit in banks. Moreover, the loan has specifically decreased in sensitive areas such as transport, communication and public services.

Price rise is another factor that has worsened the state of economic woes facing Nepali economy. The consumer price inflation stands at 11.3 % this time as against 10.7 % in the past year.

In NEPSE, the contradictory trend of growing number of companies in the secondary market and falling Index appears to be the rule. One year ago at the end of the six month of the then fiscal year, NEPSE stood at 530.96 while the figure dived to 402.75 points. The market capitalization in stock front stands at poor Rs. 3.49 billion.

Analysts seek to convince investors about the falling NEPSE by explaining the phenomenon of over supply and correction measures that feature the stock market. They assure that the market would improve if political stability is maintained and subsequent economic direction is given a functional clarity.

Because of delayed budget, the government has not been able to spend as per plan. The amount of money it has failed to spend stands at Rs. 22.42 billion. The same has created a chain of adverse effects on all aspects of economy. The only sector that has a ray of hope is export which increased by 5.9 % in the first six months of this fiscal year. The fall in export of some key commodities in the sector is worrying. The headache of deficit balance of payment still continues as its figure touches Rs. 4.43 billion as against Rs. 3.35 billion in the past year's first half.

In the past week, NEPSE saw decline of key sectors' sub-indices. The only sector that gained during the period is: manufacturing and processing. nepalnews.com Feb 27, 2011

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