Simplified Explanation of Upward and Downward Trends in NEPSE Over Time

 In contrast to other nations, Nepal's stock market has a comparatively brief past. The Nepal Stock Exchange (NEPSE) was established in 1993 and officially commenced its trading operations in January 1994. Initially, NEPSE had a mere 37 companies listed. Throughout the span of 29 years, the market has undergone substantial expansion, now featuring over 250 tradable listed companies. Despite its relatively short existence, NEPSE has already witnessed four periods of rapid growth and four instances of significant decline. This article seeks to examine and analyze these distinct phases of ascent and descent.

1st Upsurge and Decline: Between 1999 and November 23, 2000, the NEPSE index experienced a remarkable tripling, reaching a peak of 545.82 points in a span of approximately two and a half years. However, this rapid growth was followed by a significant crash, with the index plunging to 186.22 points within just one and a half years, resulting in a loss of over 65%.

2nd Upsurge and Decline: It took nearly five years for NEPSE to surpass its previous peak of 545.82 points. During this period, the market gained momentum due to declining interest rates, which have an inverse relationship with the stock market. However, in 2008, the NEPSE index experienced a sudden downfall after reaching an all-time high of 1,175.38 points in July. The global financial crisis played a major role in triggering this crash, impacting Nepal's stock market as well. Over a period of more than four years, the index suffered a brutal decline of over 75%.

3rd Rally: Following the crash, it took four years for the NEPSE index to recover and six years to surpass the previous high of 1,175.38 points. From 2012 to 2016, NEPSE witnessed an impressive rally, with the index surging by over 550%. This rally was driven by lower interest rates and the expansionary policies of the Nepal Rastra Bank, which aimed at boosting commercial banks. Additionally, the 2015 earthquake had a significant impact on the real estate sector, diverting investments towards the stock market. NEPSE reached a peak of 1,881 points in July 2016.

Bear Market of 2016: In 2016, factors such as the border blockade, low GDP growth, and liquidity issues led to a shift from a bullish to a bearish market. The government's focus on post-earthquake reconstruction resulted in a liquidity crisis in banks and financial institutions, leading to high loan rates. These elevated interest rates and liquidity constraints were the primary causes of the NEPSE crash in 2016.

4th Upsurge and Recent Downtrend: The recent bullish rally, which began in early 2020, marked the fourth upswing for NEPSE. Factors such as the COVID-19 pandemic, the introduction of the TMS system, lower interest rates, and ample liquidity contributed to this surge. Within 21 months, NEPSE reached an all-time high of 3,200 index points. The best-performing sectors during this rally were hydro, finance, and development banks. However, the market peaked at 3,227.30 points on August 19, 2021, following unfavorable monetary policies, including stock holding caps, increased risk weightage and CD ratios, and higher interest rates. The recent Russian-Ukrainian conflict and global financial crisis have also influenced the ongoing downtrend.

In conclusion, the NEPSE market is currently in a consolidation phase, with the potential for a rebound depending on various factors. A positive change in the upcoming monetary policy could serve as a catalyst, restoring market confidence and potentially leading to an upward trend. Monitoring fundamental factors, technical indicators, interest rates, liquidity, and investor sentiment will provide valuable insights into the future trajectory of NEPSE.