Nepal Stock Exchange (Nepse) last week plunged a whopping 87.42 points to close at 1,375.14 points due to a slowdown in demand amid rising interest rates on margin loans as a result of liquidity crunch in banks.

The secondary market that opened at 1,462.56 points on Sunday gained 3.28 points to close at 1,465.84 points. On Monday, the market shed 7.96 points and closed at 1,457.88 points. The index lost 24.89 points, 36.38 points and 21.47 points on Tuesday, Wednesday and Thursday, respectively.

Overall, the capital market plunged 5.97 percent over the week.

Anjan Raj Poudel, managing director at Thrive Brokerage House, attributed the fall in the Nepse index to banks — facing severe liquidity crunch — tightening issuance of loans against shares. “Banks have started to impose curbs on margin lending, resulting in a slowdown in demand for shares,” he said.

Besides, investors have put in a huge amount of money in Initial Public Offerings (IPOs) and rights issuance last week, Poudel added. “As a result, around Rs60-65 billion of investors’ money has been stuck.”

Along with the Nepse index, the sensitive index that measures the performance of group ‘A’ companies dipped 18.84 points to close at 298.48 points.

Total value of shares listed on the exchange also declined by Rs98.37 billion, with the market capitalisation coming down to Rs1,547.25 billion from Rs1,645.62 billion over the week.

Except for manufacturing and trading, all other sub-indices posted losses. The biggest loser was the insurance sub-index (down 572.64 points). Poudel termed the fall in the insurance index as “market correction” after a period of massive growth.

The hydropower sector was down 100.85 points to 1,620.92 points. Commercial banks fell 88.63 points and hotels lost 85.65 points, followed by development banks, finance companies and others.

Manufacturing was last week’s sole gainer(up 68.71 points), while the trading sub-index was non-mover.

Prabhu Bank’s promoters’ shares recorded the highest turnover of Rs363.08 million. Poudel said the bank witnessed bulk share trading as its transactions resumed after a long gap following the completion of its merger with Grand Bank Nepal and Nepal Development Bank.

Prabhu’s ordinary shares came second in terms of the transaction amount (Rs121.64 million). It was followed by Nepal Investment Bank, Siddhartha Bank and Nepal Life Insurance.

Prabhu also led in terms of the number of traded shares (1,856,000 units).

Last week, shares of 155 listed companies changed hands. Despite the fall in Nepse, the transaction amount, however, rose 19.94 percent to Rs2.22 billion. The number of traded shares declined to 6,667,000 from 11,318,270 units.