Nepal's Stock Market: From Post-Election Rally to Eroding Investor Confidence
Nepal's NEPSE index surged 6% immediately after the 2026 general election on hopes of political stability, but the rally proved short-lived as investor confidence collapsed amid falling trading volumes, policy uncertainty, and high-profile arrests. Market capitalization fell from Rs. 5.009 trillion in March to Rs. 4.416 trillion by July, with the index losing over 360 points from its post-election peak.
A Rally Built on Hope
Nepal's stock market sentiment has been a roller coaster over the past half-year, peaking immediately after the general election and then correcting sharply amid reduced trading volumes, arrests of key figures, investigations, and wavering investor confidence. By the end of September, the optimism that sent the market surging sharply higher immediately after the election had vanished.
The NEPSE jumped 162.93 points, or 6 percent, to close at 2,875.43 on March 9, 2026, after hitting all three positive circuit breakers on the day as traders snapped up shares in expectation of economic growth after the election. The index had closed at 2,712.49 points on March 3, 2026, and climbed to 2,875.43 on March 9, jumping 162.93 points or 6 percent. The market jumped 4 percent in the first hour, 5 percent in the second, and 6 percent later in the day before closing.
The rally was driven by expectations of political stability and a new economic direction following the election. The Rastriya Swatantra Party secured 125 of the 165 first-past-the-post seats, creating expectations of a strong government with the capacity to introduce policy and institutional reforms.
The Correction Sets In
The bullish run in the share market, however, was short-lived as the NEPSE fell 32.08 points to 2,843.35 on March 10, 2026. It then rebounded strongly on March 26, 2026, closing at 2,950.16 points. This was the level to which the NEPSE regained just before Prime Minister Balendra Shah took office on March 27, 2026. NEPSE fell by 71.05 points on March 29 and 47.71 points on March 30, 2026. The market continued its slide, recording a drop of 105.50 points on April 5, 2026.
The sharp correction showed that the election rally had been largely based on expectations. Once the government was formed, investors began evaluating actual policies, liquidity, earnings, regulation, and the broader business environment rather than simply pricing in political change.
Market Value and Index Decline
Not only the index but also market value dropped significantly during the period.
The total market value of Nepal's stock market declined from around Rs. 5.009 trillion as of March 26 to around Rs. 4.416 trillion as of July 13, 2026. During the period, the NEPSE also dropped more than 380 points, from 2,950.16 to 2,570.28 points. The market continued to decline, hitting 2,613.33 points on September 28 and 2,598.89 points on September 30, 2026. It closed at 2,587.25 points on October 2, 2026. The index was down more than 360 points compared to where it was in early March, when Balendra Shah took office.
The trading pattern also changed. The market moved from the high-turnover, high-expectation environment seen around the election to a more cautious phase in which investors increasingly preferred to wait rather than commit fresh capital.
Confidence Damaged Quickly
The most surprising lesson about Nepal's capital market in the past six months is how quickly investor confidence was damaged after the new government was formed.
The bullish run recorded immediately after the election demonstrated that investors were quick to believe that the election results would bring stability to the country and, by extension, the capital market. They were, however, just as quick to realize that the situation had not changed substantially after the new government was formed.
According to an analysis by The Kathmandu Post in July 2026, in the first 106 days of the new government, the NEPSE fell on 47 of the 73 trading days and rose on 26 days. In addition, the analysis noted that trading volumes were on average Rs. 13 billion per day before the new government was formed, compared to only Rs. 5.6 billion per day in the same period after the government was formed. Similarly, capital-gains tax collections from the capital market also dropped from Rs. 15.306 billion in the first 11 months of the fiscal year ended July 2025 to only Rs. 9.64 billion in the first 11 months of the fiscal year ended July 2026, a drop of about 37 percent.
Investor confidence was also dented by controversies surrounding key figures and ongoing investigations, which added to the climate of uncertainty and kept many participants on the sidelines.