ILLUSTRATION: MINH UONG
ON OCTOBER 2ND the Nepal Stock Exchange (NEPSE) index closed 19% below the peak set on August 18th 2021, more than five years ago. The fiscal year that ended in July cost holders 7.05%. The year had begun well, with a four-year high of 3,002 on July 29th 2025. By the end of August the index stood 16% lower.
Wealth in shares comes from long climbs that investors can compound, and over three decades NEPSE has had one. From a base of 100 in 1994 the index has risen about 26-fold, or roughly 10% a year in price terms. A third of that compound gain, however, arrived in the 29 months from a low of 1,099 in March 2019 to the peak of August 2021. A fall of 42% followed, to 1,848 by June 2022, then a recovery that took three years and a slide that has lasted one. The case for shares is real: deposits pay an average of 3.15% whereas inflation runs at 5.14%. It is a case for holding through all of this.
Climbs last when buyers stay. Analysts say better year-end results have not lifted prices because retail investors want quick gains rather than dividends, and because the market lacks institutions to absorb a growing supply of shares. Mutual funds, the obvious candidates, held 1.5% of NEPSE’s market capitalisation in March. One analyst said many investors had earned too little for three or four years and were looking for the exit.
The rules move as often as prices. The budget of May 29th raised the tax on gains from shares held for under a year from 7.5% to 10%, and the market kept falling. On September 14th the finance ministry cut the rate to 5% in a 21-point plan. NEPSE jumped 1.87% the next day and had slipped back to 2,603.71 within a week. The plan also promises margin lending (loans from brokers to buy shares), short selling and intraday trading, which an explainer by Nepal News noted can raise volatility if handled carelessly. Rules for margin lending and intraday trading are due by mid-October. On September 21st a ransomware attack on a data centre serving 72 brokers shut the exchange for a day.
Fund managers will say their record beats the index, and they have a point. A column in the Himalayan Times reported that 11 of the 14 funds that have matured beat NEPSE over their lives, averaging 15.76% a year against 8.57% on fixed deposits. But a record across past fund lives says little about the next seven years. Managers who aim for double-digit returns need a market that has not managed a sustained climb since 2021.
Value investing makes a further demand. It bets that a share price drifts towards the worth of the business behind it, and the drift must arrive within the life of the fund; Nepal’s closed-end funds mature after five to seven years. A market in which better earnings failed to lift prices in August does not oblige. Those who buy because a business is cheap may wait for others to notice, and in a market of short-term traders the noticing can take longer than the fund exists. Good luck to them.
A new benchmark index based on company fundamentals is due by mid-December, and margin trading through licensed brokers by mid-January 2027. Nepal will soon have more ways to bet on its market and a new yardstick to measure it by. Neither is the sustained climb that makes wealth. ■
