Since the last few days, the total transaction amount in Nepal Stock Exchange (NEPSE) is continuously rising. At the time when the government expenses is shrinking and liquidity is decreasing in the financial system, it is a great matter of concern from where the money is flowing into the stock market.

Apparently, investors are steering their fixed deposits and income from other sectors to the stock market leading a boost in the daily transaction amount.

“Mobilization of bank fixed deposit is enlarging the daily transaction amount”, said Bharat Ranabhat, Chairman of Nepal Stock Broker Association. “Bank fixed deposit mature every month. The interest rate given by BFIs in a fixed deposit is also going down. The interest rate of the fixed deposit has declined to 9 percent from previously 14 percent. Thus, the huge decline in the interest rate has also provoked the depositors to mobilize their funds to the stock market,” he said.

The fact is also proved by the minimum increment in fixed deposit seen in Nepal Rastra Bank’s report of the last five months. The fixed deposit that grew by 24 percent in the previous report has come down to a peripheral of 2 percent. The effect of deducted interest rate in fixed deposits can be seen in the overall growth of fixed deposits.  Seemingly, the amount is now being mobilized to the stock market and other sectors.

Moreover, it is likely that the investors are also rolling their savings into the stock market. As per the NRB report of the last five months, the saving deposit and call deposits of BFIs have declined by 0.42 percent and 2.04 percent respectively. It also signals that the investors are channeling their money to the stock market.

Crisis in the real estate sector, tight NRB policy in lending, narrowing profit of the service sector is forcing the investors to steer their investment toward the stock market. They are here to rake short-term profit.

Moreover, the stock market is also gaining by the flexibility shown by Finance Minister Dr Yubraj Khatiwada towards the stock market in recent days. Similarly, investors are taking the appointment of Chairman in Securities Board of Nepal (SEBON) as a positive sign for market development. The recent episodes have boosted the confidence level of stock investors which have increased both trading and transaction amount in the stock market.