Banking News – Nepal’s capital market recorded share transactions worth more than Rs. 16.01 trillion during FY 2025/26 (2082/83 BS), but despite a market capitalization exceeding Rs. 44.63 trillion, trading activity continues to be heavily influenced by a limited number of large investors and investment groups.

According to the Nepal Stock Exchange (NEPSE), a total of 3.78 billion shares were traded during the fiscal year, generating a transaction value of Rs. 16.01 trillion. The annual turnover was 24.61% lower than the Rs. 21.24 trillion recorded in the previous fiscal year.

During the year, trading took place over 223 trading sessions, with an average daily turnover of Rs. 7.18 billion. More than 18.17 million transactions were executed across 471 listed securities, including shares, debentures, and mutual funds. NEPSE reported that only one transaction worth Rs. 20,000 was cancelled throughout the year due to technical or regulatory reasons.

Hydropower Sector Dominates Trading

The hydropower sector accounted for the largest share of market activity, with Rs. 710.50 billion worth of shares traded—representing 44.35% of the total annual turnover.

Other major sectors recorded the following trading values:

• Manufacturing & Processing: Rs. 147.73 billion
• Commercial Banks: Rs. 130.06 billion
• Development Banks: Rs. 107.92 billion
• Others Sector: Rs. 100.36 billion
• Microfinance: Rs. 89.45 billion
• Investment Companies: Rs. 78.74 billion
• Finance Companies: Rs. 56.45 billion
• Life Insurance: Rs. 54.31 billion
• Hotels & Tourism: Rs. 38.07 billion
• Non-Life Insurance: Rs. 28.86 billion
• Founder Shares: Rs. 24.65 billion
• Debentures: Rs. 34.26 billion
• Mutual Funds: Rs. 4.49 billion
• Trading Sector: Rs. 3.10 billion

7.76 Million Demat Accounts, But Market Influence Concentrated

Although more than 7.76 million Demat accounts have been opened in Nepal, indicating broad retail participation, the report argues that market prices are still largely influenced by a relatively small group of large investors, organized investment clubs, and short-term traders, rather than millions of small investors.

Unlike developed markets, where pension funds, insurance companies, and mutual funds provide stability through institutional participation, Nepal’s institutional investor base remains relatively weak. Out of the country’s Rs. 44.63 trillion market capitalization, mutual funds account for only around Rs. 40–50 billion, leaving significant room for concentrated market influence.

Concerns Over Cornering and Pump-and-Dump Practices

The report highlights that many hydropower, finance, and microfinance companies have only 10% to 30% of their total shares available for public trading. This relatively low free float enables groups of wealthy investors to accumulate a significant portion of tradable shares, creating an artificial shortage in the market.

Once liquidity tightens, these groups can drive prices higher through transactions among themselves, often pushing stocks toward consecutive upper circuit limits. Rising prices then attract retail investors, who enter the market fearing they may miss further gains.

The report notes that this pattern resembles a classic “pump-and-dump” strategy, where early investors sell their holdings at inflated prices after attracting retail participation, causing prices to fall sharply afterward.

It also recalls a 2021 study by the Securities Board of Nepal (SEBON), which found that the share prices of 51 listed companies had risen by 300% to 1,000% without corresponding improvements in their financial fundamentals.

Large Investors Enjoy Greater Access to Capital and Information

According to the report, more than 70% of share-backed loans, estimated at between Rs. 90 billion and Rs. 100 billion, are utilized by borrowers with loans exceeding Rs. 10 million, including large investors and private investment companies.

Major business houses, including Vishal Group, IME Group, and Hulas Group, are identified as examples of institutions capable of deploying significant capital through their investment companies. Combined with better access to market information and brokerage networks, these investors possess advantages that are generally unavailable to ordinary retail investors.

Market Size Continues to Expand

As of the end of Ashad 2083 BS, 302 companies were listed on NEPSE, with 9.58 billion listed securities and a combined paid-up capital of Rs. 944 billion.

Total market capitalization reached Rs. 44.64 trillion, of which Class ‘A’ companies accounted for Rs. 20.46 trillion, representing 45.83% of the market.

During the fiscal year, the NEPSE Index climbed to a high of 3,002.08 points before retreating to close the year at 2,597.80 points. The Sensitive Index declined from 518.60 to 456.87, while the Float Index fell from 206.26 to 178.58.

Despite the rapid expansion of Nepal’s capital market—with market capitalization exceeding Rs. 44 trillion, daily trading averaging over Rs. 7 billion, and more than 7.7 million Demat accounts—the report concludes that limited institutional participation, concentrated ownership, hydropower-focused trading, social media-driven speculation, and the superior capital and information access enjoyed by a small group of investors continue to shape the market’s direction, leaving retail investors with relatively limited influence.