Continuing the bullish run, the capital market hit all-time high on Wednesday as the Nepal Stock Exchange (Nepse) index posted a gain of 1191.92 points.

The benchmark index surged by 31.99 points on the back of a strong trade in the market. The country’s capital market has been on the upward trajectory since the Nepal Rastra Bank (NRB) announced a capital increment plan for the banks and financial institutions (BFIs) through monetary policy for the current fiscal.

Stock analysts and stockbrokers say that the share market has been driven lately by the possibility of bonus and rights shares of the banks and financial institutions (BFIs) following the central bank’s directive to hike their capital. The directive stipulates that the BFIs should increase their minimum paid up capital by four fold within the next two years. Nepse General Manager Sita Ram Thapaliya said the strong buying pressure witnessed in the recent days contributed to an unprecedented surge of the market.  

Stock analyst Rabindra Bhattarai said that people are buying shares, particularly of the BFIs, with expectations of getting bonus and rights shares following the central bank instructed the BFIs to hike their capital. The central bank has directed the BFIs to submit their capital increment plan by mid-September.

With the central bank banking coming up with another directive on Wednesday, asking the BFIs not to provide cash dividend, stock analysts predict announcements of rights and bonus shares being issued in the next few days.

This will likely to fuel the market further, according to them. “The market could grow for a few more days before going into correction,” said Bhattarai. “The investors who are buying now will rush to sell shortly before the market begins downward adjustment.”

Amid the recent surge, Nepse on Tuesday directed the BFIs to make public their capital increment plan with central bank’s approval, warning them of penalties under the Securities Act.

As per the Act, anyone influencing the market can be punished with a fine of Rs 50,000-100,000 or sentenced to jail for up to one year or both, and the guilty will be liable for damages resulting from such act.

Investors and experts have, however, warned that a few investors could take advantage of the current bubble in the share market.

Gyanendra Lal Pradhan, one of the big investors in the stock market, said that short term investors could take advantage of the situation by capitalising on the rising stock prices, leaving long-term investors vulnerable. “Short-term investors will seek to benefit before market goes for correction,” he added.  

According to Narendra Raj Sijapati, president of the Nepal Stockbrokers’ Association, the current surge in market could bust anytime if the concerned authorities keep a close tab on the market. “Nepse depends on transaction of limited types of stocks, particularly of BFIs, leaving it vulnerable to a market crash,” he said. The bond market, which could be alternative to stocks, has largely been inactive.

Meanwhile, Securities Board of Nepal, the regulatory body of the sector, has considered the current surge in the market “positive but sceptical”. Niraj Giri, spokesperson for the board said, “We are ‘cautiously watching’ the market trend.”