Summary: The government led by the Rastriya Swatantra Party (Raswapa) has stirred unease among older political parties by advancing asset cleansing initiatives, which has led to a significant decline in the stock market. The arrest of the CPN-UML chairman and former Home Minister and the political uncertainty triggered by UML’s street protests have raised investor concerns. Although the Nepal Stock Exchange’s NEPSE Index remains in a bullish trend, experts suggest that a market correction is necessary following recent government decisions.
Kathmandu, 17 Chaitra – Despite the stock market showing signs of a bullish trend after the Janaji movement brought prospects of political stability, the market experienced an unusual downturn this week. After the House of Representatives election on 21 Falgun, where the Raswapa-led government secured nearly a two-thirds majority of votes, the market saw a sharp drop due to the government’s stance that unsettled old political parties, neglected the stock market’s concerns, and prioritized asset cleansing.
The new government promptly arrested CPN-UML chairman and former Prime Minister KP Sharma Oli on Saturday, followed by the detention of Nepali Congress leader and former Home Minister Ramesh Kumar Lekhak. As corruption investigations commenced into several senior leaders, negative sentiment deeply affected the stock market. The NEPSE index dipped by 119 points on Sunday and Monday alone.
Stakeholders widely interpret that the street protests by the CPN-UML have added to political instability, which has caused investors to react with fear and triggered the market’s steep decline. Nevertheless, experts emphasize that since the NEPSE index is still in a bullish trend, the current correction is a necessary adjustment for sustainable growth.
Following election certainty, stock market indices generally turn positive, but historically, markets have often declined after vote counting. This time, with one party winning nearly two-thirds of the mandate, investors had anticipated greater political stability. However, the government’s approach toward established political parties has elicted market resistance, according to an investor.
“The market is on a path toward long-term improvement,” the investor said. “The recent NEPSE drop reflects the impact of the government’s latest decisions, which may have a temporary effect, but the market growth in the coming days is certain.”
