Complexity in computing capital gains clouds market sentimentInvestors lost Rs6.91 billion in the book value of their investment portfolio.
Nepal Stock Exchange last week slid by 6.08 points to close at 1,263.84 points as worries over the complexity in calculating capital gains clouded market sentiment.
Despite the fall in the market index, the average daily turnover rose to Rs417.24 million last week from Rs395.56 million in the previous week due to a selling spree on the back of investors losing confidence.
The market which opened at Rs1,269.92 points on Sunday plunged 17.11 points to close at Rs1,252.81 points. However, the secondary market gained 3.18 points, 3.39 points and 6.2 points on Monday, Tuesday and Wednesday respectively. On the final day of trading, the market dropped 1.74 points, a day after the Ministry of Finance reached a consensus with the investors' association to resolve the calculation of capital gains.
As a result, the overall market index fell marginally by 0.48 percent during the review period.
Stock analysts said existing problems such as the shortage of loanable funds with banks and the high-interest rate had failed to boost investor confidence overshadowed assurances by the government to resolve the calculation of capital gains tax.
The recently announced budget had slashed capital gains tax from 7.5 percent to 5 percent.
However, investors, brokers and even the regulatory authority had no idea how to implement the government's new policy. Capital gains refers to the profit that arises from the sale of shares.
While implementing the new rule, stockbrokers had asked investors to be present at their office to settle capital gains tax. But investors complained about the requirement, saying that the provision was impractical and that they would launch a protest if the government did not resolve the problem.
The Finance Ministry reached a compromise and eased the assessment process, allowing investors to settle the tax online.
“Despite the government step, investors are still sceptical that it would help boost up the market and rushed to offload shares,” said a stockbroker under the condition of anonymity.
The sensitive index that measures the performance of Group A companies also fell slightly by 0.94 points to close at 272.53 points.
With a fall in the shares prices of the majority of listed companies, investors lost Rs6.91 billion in the book value of their investment portfolio, after the market capitalisation declined to Rs1,574.28 billion from Rs1,581.19 billion.
Except for microfinance and finance companies, indices of the remaining nine groups plunged during the review period. Life Insurance lost the largest of 62.51 points to close at 5,894.32 points. Index of manufacturing, non-life insurance commercial banks and hotels also posted double-digit losses.
Likewise, hydropower shrank 7.83 points, development banks dropped 6.31 points while 'others’ and trading sank by 4.62 points and 2.61 points respectively.
Among the gainers, microfinance and finance companies succeeded in raising their indices by 78.49 points and 6.23 points respectively.
Regarding the individual companies, Nepal Bank Limited observed a total transaction of its shares worth Rs112.04 million, the largest in the segment. It was followed by Agriculture Development Bank, Prabhu Bank, promoters’ shares of Neco Insurance and Shivam Cements.
Last week, stocks worth Rs2.08 billion were traded, which was 5 percent more than the amount in the previous week. The total number of traded shares also increased to 7,481,450 units from 7,192,760 units.
During the review period, Nepal Stock Exchange listed 2,506,040.19 units of bonus shares and 1.5 million units of debenture.