Reforms on Paper, Red on NEPSE: Why Nepal's Stock Market Keeps Falling
Nepal's new government and regulators have rolled out an ambitious reform agenda for the capital market, from a 21-point revival plan to new trading instruments. Yet the NEPSE index has fallen more than 330 points since the government took office, as most measures remain stuck at the policy stage and a ransomware attack halted trading for a full day.
Reforms on Paper, Red on NEPSE: Why Nepal's Stock Market Keeps Falling
Nepal's new government has introduced a series of measures aimed at strengthening the capital market, while the Securities Board of Nepal (SEBON) and Nepal Rastra Bank (NRB) have also moved forward with several regulatory changes. However, the Nepal Stock Exchange (NEPSE) has not shown a sustained positive response.
Prime Minister Balendra Shah took office on March 27, 2026, with Dr. Swarnim Wagle as Finance Minister. At the time, the NEPSE index stood at around 2,950 points. By September 28, the index had fallen to 2,613.33 points — a decline of more than 330 points from the level around the formation of the new government.
The fall has continued despite a series of measures intended to make the market more active, improve trading infrastructure and bring more investors and financial resources into the market.
What Has the New Government Done?
The government included capital market reform among its economic priorities from the beginning of its tenure.
The budget for fiscal year 2083/84 announced the restructuring of NEPSE and the gradual introduction of new trading facilities, including:
- Intraday trading
- Short selling
- Derivative instruments
It also called for stronger technology-based trading systems and investor protection.
The government later introduced a more detailed 21-point Capital Market Strengthening and Revival Action Plan, 2083 in September.
The plan covers IPO-related rules, the bond market, institutional investment, NEPSE restructuring, tax changes and wider participation in the capital market. It also includes plans to create a new benchmark index, restructure NEPSE and make legal changes to allow non-resident Nepalis to participate in the secondary market.
One of the major tax-related proposals is to reduce the capital gains tax (CGT) burden for investors holding shares for longer periods, with the stated objective of encouraging long-term investment. The CGT has kept changing after the budget, and the government recently announced 3.5% for short-term and 5% for long-term holdings.
The government has also proposed legal arrangements for margin lending, intraday trading, securities lending and borrowing, and short selling. However, most of these measures are still at the policy, legal or implementation stage. They do not immediately put additional buying money into the market. Only 11 brokers are doing margin trading, and the remaining brokers are still in the process of obtaining margin lending approval. A short selling concept paper was introduced last week with the concept of "buy first, sell later" on the same day.
SEBON Moves Beyond Announcements
SEBON has moved beyond announcing long-term plans and has started preparing the rules required for several new market facilities.
In July, the regulator published its Capital Market Development Roadmap and fiscal year 2083/84 capital market policy. It has also formed a committee to coordinate the implementation of margin lending, intraday trading, securities lending and borrowing, and short selling.
On the other hand, Nepal Rastra Bank recently reduced the minimum period for which banks and financial institutions must hold listed shares and debentures from six months to 45 days.
The change gives banks and financial institutions greater flexibility to manage their share investments. The revised rule also requires banks to have board-approved policies and procedures to control the risks associated with such investments.
Yet the market has not responded with a sustained rise.
What Has NEPSE Done?
NEPSE has also been instructed to modernize its trading infrastructure and prepare for new products.
However, trading was suspended on September 21 after a technical problem affected its data hub. A SEBON notice states that a ransomware attack on the data hub led to the closure of trading for a whole day. Trading resumed the following day.
The incident has added to the regulator's focus on the reliability and modernization of NEPSE's technology. SEBON has formed a five-member committee to investigate the issue and develop