In the last one and half months, hotel group has surged by 72 percent and Non-life insurance sector uplifted by 37 percent, trading sector by 36 percent. Similarly, life insurance sector jumped 35 percent and microfinance sector climbed 33 percent.
Meanwhile, the hydropower sector which led the index to peak at 3200 points at some point have climbed only 15 percent during the period. Along with it, the banking sector has also been unable to attract investors.
In recent times, NEPSE index which took a upward trend with the support of hotel group has now taken the support of microfinance and banking groups. The groups have pulled NEPSE index to the height of 2186.36 points.
One of the many reasons why the hydropower sector took the back seat is said to the interest rates. As per Gyanendra Lal Pradhan, hydropower developer and big stock investor, the hydropower sector took the backseat due to five reasons.
He said that the interest rates affect the most in the hydropower sector. Currently, the interest rates are high due to which EPS of the sector has lagged. Usually, investors are skeptical of investing in such a sector.
Another reason is the overflow of initial public offerings (IPOs). Most of the investors have hydropower share due to the overflow of IPO, thus, they might want to diversify their portfolio.
Third reason is the destruction of hydropower projects due to floods that occurred in East Nepal. There is news everywhere of huge destruction caused to hydropower projects by the floods. But the people are ignorant of the fact that the hydropower projects are fully insured. Due to this ignorance, investors are avoiding purchasing hydropower shares.
Fourth reason is oversupply of hydro shares due to the end of the locking period. After three years of locking period, promoter shares are also being sold like ordinary shares which has also limited the market price.
The last reason is Nepal Electricity Authority (NEA). NEA has not bought electricity generated by the private sector. Despite of ‘Take or Pay’ Policy, NEA has refused to buy 500 MW of electricity generated by 32 projects. It has diminished the loan payment capacity of those projects. 500 MW is huge for the private sector. Moreover, the rainy season is the peak season for hydropower projects to earn money but NEA refrained to buy from the private sector in that season too. This attitude of NEA has negatively affected the business of the hydro sector which ultimately discourages investors from investing in the sector.
