The Nepal Stock Exchange (Nepse) index plunged to an 11-month-low of 1,309.70 points on Monday as investors stayed away from shares due to a liquidity shortage.

Last year there was a bull run and the Nepse hit an all-time high of 1,819.88 points on October 6.

The stock market has been undergoing a bearish trend for the last few months. As a consequence, the Nepse slipped below 1,400 points last Wednesday. The index has shed 123.29 points just in the last three days. 

On Monday, the secondary market opened at 1,375.47 points and was on a downward trend throughout the day. As a result, the market lost 65.44 points, the biggest single-day fall since August 9 when the index had plunged 84.51 points.

Stockbrokers and experts attributed the sharp fall in the Nepse to a liquidity shortage and uncertainty over the capital increment plan of insurance companies.

Parmeshwor Bhakta Malla, managing director of Malla & Malla Stock Broking Company, said delays in the capital increment plan of insurance companies had affected the overall market.

“As the government is likely to allow the Insurance Board to make insurance companies raise their capital base rather than enforce the provision through a proposed insurance act, investors have lost confidence in insurance company shares,” Malla said. “In order to recover losses from insurance stocks, many investors were seen selling shares of other groups at a low profit margin.”

Almost all the trading groups witnessed a fall in their indices. Insurance lost the most of 546.55 points while the hotels index plunged 128.48 points. They were followed by hydropower, commercial banks, development banks, finance companies and others.

Stock analyst Neerab Pudasaini blamed increasing interest rates for the ongoing bear trend in the capital market. “As banks have recently raised interest rates on fixed deposits, many investors have been drawn to this safer option,” he said.

Pudasaini added that Nepal Rastra Bank’s recent directive to banks to curb margin lending was another reason for the Nepse’s freefall. The central bank has fixed the limit for loans against shares at 50 percent of their value.

Pudasaini expressed the hope that the Nepse would not fall heavily as in the past due to the existence of institutional investors. “Although the market looks like falling below the 1,200 mark as per present trends, investors need not worry due to this reason.”

Along with the fall in the Nepse, the market value of stocks also plunged with market capitalisation losing Rs73.63 billion to Rs1,473.62 billion.

The sensitive index that measures the trading of blue chip companies also shed 14.41 points to close at 284.07.

Among the 121 companies whose shares were traded on Monday, 116 suffered losses. Shikhar Insurance witnessed the largest fall of 195 points, followed by Summit Microfinance (150 points) and Lumbini General Insurance (119 points).

The indices of only five companies saw an increase. Rastriya Beema Company made the highest gain of 97 points. The other gainers were Arun Finance, Oriental Hotels, Reliance Finance and Excel Development Bank.