After Finance Ministry's flexible policy, NEPSE turns green, signals 'Balen Bull'

Kathmandu. The general share investors had hoped– 'After the Balen government comes, the market will boom, the Balen Bull will arrive.' Share investors, who understood that the market cannot prosper without political stability, had quietly placed their bets for this reason. However, those who complained that the government did not bring policies or show guardianship as expected had increased. But another truth was that as much as investors were disappointed when the share market fell, the government was equally serious. For a long time, it seemed clear that the government was striving to uplift the share market somehow.

To put it bluntly, if the Ministry of Finance had announced in the budget what is now stated in the 'Capital Market Strengthening and Revival Action Plan – 2083' issued today, the market would have already shown much more confidence. Although delayed, the move is good. And from tea gossip to broker houses, the debate is heard: if the market doesn't rise now, when will it?

The long-standing demand of investors was that the government should create policies, legal, and infrastructural arrangements to facilitate institutional investors' entry/investment in the capital market. That demand has been fulfilled. From developing necessary investment policies and transaction structures for institutional investors to increasing their participation in the primary market, there is no doubt that the government's strategy will directly impact the market. Market experts believe such a policy will help make the market more stable.

The demand for Portfolio Rebalancing of institutional investors has also been met. That is, now institutional investors like Employees Provident Fund, Citizen Investment Trust, Social Security Fund, Insurance Companies, and Mutual Funds will be encouraged to invest in the capital market. Its impact is directly seen in the market. As a result, large institutional savings will be mobilized in the capital market, investment diversification will increase, it can help reduce market volatility, and demand in the market will rise, increasing the likelihood of the market going up.

The government has also introduced a strategy to enhance the capacity of CDS & Clearing. The government's policy to increase the institutional capacity of CDS and Clearing to effectively handle the growing size of securities transactions is expected to enhance settlement capacity and efficiency, and reduce systemic bottlenecks even during large transactions. Investor confidence and market infrastructure will strengthen, and necessary digital infrastructure for future capital market expansion will be prepared.

The government's policy on PE/VC and Startup Financing will create a situation to provide capital to early-stage industries and businesses. Dependence on bank loans will decrease, equity financing will increase, and capital will be available for startups, innovation, and technology-based businesses. This can increase new employment and entrepreneurship, and opportunities for capital mobilization in productive sectors will rise. The government's policy to review banks' and financial institutions' capital market investments is expected to help control risks between banking and the capital market. It will help strengthen financial stability.

The government's policy to provide tax incentives for long-term investment is even more remarkable. The government's policy to reform the existing tax system to encourage long-term investment in the capital market, especially by reducing tax rates to 3.75% and 5%, will certainly bring positivity to the market. Moreover, investors are excited about the policy of setting off losses against profits and paying tax only on net gains.

This government policy is expected to increase attraction for long-term investment. There is already a possibility of increased stability and confidence in the market, and if tax incentives are effective, new investment can also come into the capital market. There is also a possibility that investors will be encouraged and the investment amount will increase significantly.

The policy to be formulated for banks' and financial institutions' Secondary Market Investment is expected to reduce the risk of excessive speculative share trading on banks' balance sheets and encourage the mobilization of bank resources in the capital market. It is clear that investment in the capital market can reduce banks' excessive short-term impact.

Overall, the Ministry of Finance has become extremely flexible and brought a policy to uplift the share market, the direct impact of which was clearly seen in Tuesday's market.