The stock market is highly volatile and sensitive. It is affected by various factors. There are many different factors affecting Nepal’s stock market. Here, we have listed 8 major factors that have a major impact on Nepal’s stock market.
1. Political change:
Political changes in the Nepali environment have had a major impact on stock market performance. Investors in the stock market seem to be watching political developments closely. Positive political change, accompanied by political stability, has a huge impact on the stock market.
2. News, rumors, and speculations:
Nepal’s stock market has been heavily affected by news, rumors, and speculations. Rumors in the market and news in the media play a big role in influencing the stock market.
In order to reduce rumors, speculation, and speculation, transparency in this market needs to be enhanced.
3. Interest rate:
There is a negative relationship between Nepal’s stock market and interest rates. During high-interest rates in the economy, the stock market falls sharply. Similarly, if there is a low-interest-rate environment, the market seems to prosper.
The liquidity situation in the economy also plays an important role in Nepal’s stock market. As long as there is sufficient liquidity available in the interest rate, the share index will increase significantly. With more liquidity in the economy, money flows to the stock market. As a result, the rise of investors in the stock market leads to a sharp rise in share prices.
5. Increase in money supply:
Money supply has a strong positive relationship with the stock market. A liberal monetary policy can trigger an asset price bubble in the stock market, dominated primarily by banks and financial institutions. With the increase in money supply, the stock market is moving in a positive direction. But a contraction in money supply has led to a fall in share prices.
6. Business performance and dividends:
It closely follows the performance of Nepal’s stock market listed companies. When business earnings and performance increase, the stock market moves in a positive direction. Nepali investors seem to be interested in performing well after studying quarterly reports. Also, investors choose stocks that pay more dividends. They also prefer companies that declare bonus shares over other companies.
7. Central Bank Policies:
The policy of Nepal Rastra Bank, the regulatory body of banks and financial institutions, also has a big impact on Nepal’s stock market. The share market, mainly dominated by banks and financial institutions, reacts to these policies with no effect on banks and financial institutions. Most of the time, the policy of Nepal Rastra Bank in lending against share security seems to have affected the fluctuations of the stock market index. Similarly, the policy of Nepal Rastra Bank to increase the paid-up capital of banks and financial institutions has also increased the share index.
Finally, inflation can also have a positive relationship with Nepal’s stock market. During periods of high inflation, investors put their money in the stock market to generate higher returns which boosts the stock index.