Though the capital market has been stable for the last few weeks the market index has been hovering around 400 points. The market lost 3.27 points last week when Nepal Stock Exchange (NEPSE) index settled at 403.15 points on Thursday from 406.41 points on Sunday. However, the capital market saw a major development last week i.e. the introduction of mutual funds regulation. It has paved the way for establishment of mutual funds whose need has been felt for long to manage stocks of small investors.
Last week, the indices of seven sub-groups plunged and pulled down the secondary market. With a loss of 18.11 points, the group of insurance companies suffered the most followed by others sector and trading companies that dropped 10.57 points and 10.20 points, respectively. The finance companies, hotels, hydropower companies and commercial banks also slipped by 2.18 points, 0.61 point, 0.44 point and 0.09 point, respectively. The development banks’ sub-group was the lone gainer in the week, posting a small gain of 0.12 point, while manufacturing and processing companies did not see a change in their sub-indexes.
“It’s not a new factor, this rise and fall in the index,” said Jagadish Agrawal, stock expert. He pointed to economic constraints as a result of the lack of a full budget. Despite an increase in the number of shares on the trading floor, the market turnover dropped by 4.60 percent. The secondary market could realise just Rs 210.69 million in contrast to Rs 220.86 million the previous week. Meanwhile, the number of shares traded soared with an increased number of companies on the trading floor. A total of 784,537 shares of 108 companies changed hands through 5,889 transactions. The previous week, just 541,130 shares of 98 companies had been traded through 4,195 transactions.
During the week, Nepal Bangladesh Bank captured pole position in terms of highest turnover and highest number of shares traded. The bank witnessed the trading of 429,000 shares amounting to Rs 82.45 million. With 823 transactions over the week, City Development Bank registered the highest number of transactions. The domestic stock exchange registered the listing of total of 495,539 units of bonus shares and rights shares of insurance companies and development banks over the week. At a time when the stock market is in a bearish mode, the introduction of mutual fund regulation has sparked hope in the secondary market. Stock analysts have welcomed the introduction of the regulation but are skeptical of some provisions of the regulation. “The space allocated for investment is low compared to huge paid-up capital requirements,” Agrawal said. As per the regulation, companies running mutual fund companies should have a minimum paid-up capital of Rs 1 billion and the investment in the stock market should not exceed 10 percent of the capital. “The demand in the secondary market is expected to rise with the establishment of mutual fund companies but limited space for investment may not be helpful in realizing expectations,” said Agrawal.
Nanda Kishore Mundada, president of Nepal Stockbrokers’ Association, termed the requirement of huge paid-up capital impractical. “The insurance companies apart from banks and financial institutions are interested in opening mutual funds, but the amount of paid-up capital requirement might deter them,” he said. The stock regulator, however, has a different view. Surbir Poudel, chairman of the Securities Board of Nepal, said relatively higher amount of paid-up capital was fixed in order to to discourage the trend of establishing mutual funds on a bandwagon.
(news source: ekantipur.com)
Last week, the indices of seven sub-groups plunged and pulled down the secondary market. With a loss of 18.11 points, the group of insurance companies suffered the most followed by others sector and trading companies that dropped 10.57 points and 10.20 points, respectively. The finance companies, hotels, hydropower companies and commercial banks also slipped by 2.18 points, 0.61 point, 0.44 point and 0.09 point, respectively. The development banks’ sub-group was the lone gainer in the week, posting a small gain of 0.12 point, while manufacturing and processing companies did not see a change in their sub-indexes.
“It’s not a new factor, this rise and fall in the index,” said Jagadish Agrawal, stock expert. He pointed to economic constraints as a result of the lack of a full budget. Despite an increase in the number of shares on the trading floor, the market turnover dropped by 4.60 percent. The secondary market could realise just Rs 210.69 million in contrast to Rs 220.86 million the previous week. Meanwhile, the number of shares traded soared with an increased number of companies on the trading floor. A total of 784,537 shares of 108 companies changed hands through 5,889 transactions. The previous week, just 541,130 shares of 98 companies had been traded through 4,195 transactions.
During the week, Nepal Bangladesh Bank captured pole position in terms of highest turnover and highest number of shares traded. The bank witnessed the trading of 429,000 shares amounting to Rs 82.45 million. With 823 transactions over the week, City Development Bank registered the highest number of transactions. The domestic stock exchange registered the listing of total of 495,539 units of bonus shares and rights shares of insurance companies and development banks over the week. At a time when the stock market is in a bearish mode, the introduction of mutual fund regulation has sparked hope in the secondary market. Stock analysts have welcomed the introduction of the regulation but are skeptical of some provisions of the regulation. “The space allocated for investment is low compared to huge paid-up capital requirements,” Agrawal said. As per the regulation, companies running mutual fund companies should have a minimum paid-up capital of Rs 1 billion and the investment in the stock market should not exceed 10 percent of the capital. “The demand in the secondary market is expected to rise with the establishment of mutual fund companies but limited space for investment may not be helpful in realizing expectations,” said Agrawal.
Nanda Kishore Mundada, president of Nepal Stockbrokers’ Association, termed the requirement of huge paid-up capital impractical. “The insurance companies apart from banks and financial institutions are interested in opening mutual funds, but the amount of paid-up capital requirement might deter them,” he said. The stock regulator, however, has a different view. Surbir Poudel, chairman of the Securities Board of Nepal, said relatively higher amount of paid-up capital was fixed in order to to discourage the trend of establishing mutual funds on a bandwagon.
(news source: ekantipur.com)
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