Stock Market in Nepal: Movements & Behaviors

Abstract

The development and growth of the stock market in Nepal has not so long history. However, the Nepalese stock market has come through the drastic changes from the open-out-cry system to current automated trading system. The study is focused on the movements and behaviors of the one and only stock market in Nepal. The whole study tries to analyze the movements of the various sectors indices of the Nepalese stock market. It also tries to study on the various types of efficient market hypotheses (EMH).The banking sector covers the largest portion of the trading at Nepse. Similarly, under anomalies, Mid-July effects & bullish Tuesday prevails in the Nepalese stock market. The risk regarding the financial and management prevails in the Nepalese stock market. The study tries to analyze portfolio attributes of the Nepalese stock market in relation to risk and return through market model & multi-factor CAPM or, Merton Model (ICAPM). Similarly, the study has tried to bring out the opinion regarding the Nepalese stock market among the general investors. Nepalese stock market is not efficient enough to evaluate the prices of stocks. Most of the investors are not very responsive to many financial and economic changes. But it has been felt that they invariably respond to the dividend incomes, earnings per share, capitalization of profits to issue bonus and right shares. Thus, the market shows the non-competitive and inefficient characteristics. The study shows that Nepse fails to represent itself as a barometer to Nepalese investors’ confidence level as an indicator to the Nepalese economy as whole. The Nepalese investors at stock market has not followed the fundamental & technical analysis during investment but followed as gambling with the market trend. The market lies on a speculative bubble, in that nothing justifies by the underlying economic fundamentals in the rise in price except the hope that it will go higher still.