NEPSE's Prolonged Downturn Ignites Widespread Anger, Investors Demand Concrete Action Amidst Political Scrutiny

The Nepal Stock Exchange (NEPSE) continues its downward trajectory, sparking a wave of frustration and anger that now extends from individual investors to the highest echelons of parliament. Despite recent assurances from Finance Minister Dr. Swarnim Wagle regarding upcoming market reforms in the current fiscal year's budget, investor confidence remains critically low, casting a shadow over the government's ability to stabilize the nation's capital market.

Finance Minister Wagle recently acknowledged the intense criticism he has faced over the past four months concerning the government's market policies. While he maintains his commitment to long-term economic reforms over short-term popularity, his pledges have yet to translate into tangible improvements in investor sentiment. The persistent decline in the market has transformed what was once primarily an investor concern into a significant national political issue, with lawmakers and public figures increasingly vocal about the deteriorating situation.

The gravity of the capital market's slump has drawn sharp criticism from across the political spectrum. Ramkumari Jhakri, a prominent leader of the CPN-UML and a member of the National Assembly, likened the situation to a "forest fire" engulfing the capital market. She lambasted the government for its perceived failure to foster an investment-friendly environment, despite ample liquidity in banks. Jhakri further accused the administration of intimidating and detaining investors without sufficient evidence, arguing that such actions are actively undermining the capital market. Similarly, the main opposition, Nepali Congress, has taken the issue seriously. Party President Gagan Thapa has initiated consultations with experts to financially educate his party's lawmakers and staff, launching an "Economic Series" to address market challenges. Adding to the parliamentary scrutiny, MP Ambikadevi Sangraula claimed in the House of Representatives that the capital market has suffered a staggering loss of NPR 600 billion since the current government assumed office, highlighting the urgent need for intervention.

Amidst this backdrop of widespread discontent, the regulatory body, Nepal Securities Board (SEBON), under the leadership of Chairman Dr. Gopal Bhat, has introduced several policy initiatives, including guidelines for margin trading, expansion of circuit breaker limits, and debenture issuance. However, these "paper reforms" have largely failed to uplift investor morale, with the market continuing its downward spiral. Investors feel that the government has not truly grasped the market's underlying issues. Veteran investor AP Chaulagain articulated this sentiment, stating that "talks alone don't suffice" and emphasizing the market's need for concrete, results-oriented actions rather than mere assurances. He urged the government to focus on immediate problem-solving alongside future plans.

Ghanshyam Pandey, President of the Nepal Shareholders' Association, echoed these concerns, accusing the Finance Minister of failing to comprehend the capital market's inherent sensitivity. Pandey warned that a collapse in the share market would not only devastate individual wealth but also erode trust in the national economy and the government itself. He highlighted the alarming decline in trading volume and the growing inclination of investors to exit the market as grave indicators of a looming crisis. "No investor has asked the government to 'pump and dump' the market," Pandey stated, adding that "if the capital market collapses, many things collapse simultaneously: individuals, the national economy, trust in the country, and the government." He criticized the government for its apparent lack of wisdom in handling such a sensitive economic matter.

The current market season has been described as "dry," with significant repercussions for government revenue. In the first month of the current fiscal year, the government collected only NPR 62.49 billion in capital gains tax from share transactions, a drastic 245% decrease compared to the same period last year. This sharp decline suggests that the government's strategy of increasing capital gains tax to broaden the tax base has backfired, further exacerbating market woes. Investor Tara Phullel pointed out that attacking the market with taxes without first establishing a strong foundation has ultimately harmed the government itself.

The market capitalization has shrunk dramatically, plummeting from NPR 50.09 trillion before the current government's formation to NPR 44.71 trillion by August 24. This represents a loss of trillions of rupees for investors in a relatively short period. The fundamental issue plaguing the Nepali share market is not merely the declining index but the erosion of investor trust and a weak regulatory environment. Investors and experts alike agree that mere assurances are no longer sufficient. Concrete measures, such as allowing banks to engage in secondary market trading and reducing capital gains tax, are deemed essential to restore confidence and revitalize the struggling capital market. The current juncture demands decisive action to prevent further erosion of wealth and trust in Nepal's financial ecosystem.