Rising Participation of Small and Mid-Level Investors in Nepal’s Stock Market, Large Investors Still Dominate

In recent months, Nepal’s stock market has witnessed a notable increase in the participation of small and mid-level investors. According to data published by Nepal Rastra Bank for the first six months of fiscal year 2082/83, share-backed loans ranging from NPR 2.5 million to NPR 10 million have recorded the highest growth rates.

The central bank’s statistics show that loans between NPR 5 million and NPR 10 million increased by 12.8 percent, loans between NPR 2.5 million and NPR 5 million rose by 10.3 percent, and loans below NPR 2.5 million grew by 7.9 percent. This trend indicates growing interest and involvement of small and medium investors in the capital market.

Easy liquidity in the banking system and declining interest rates, now mostly in single digits, have encouraged investors to borrow from banks and invest in shares. Analysts say this has helped boost market turnover and improve overall market activity.

As of mid-January (Poush-end), the total amount of share-backed loans provided by banks and financial institutions reached NPR 152.40 billion, representing an 8.3 percent increase compared to mid-July. In the past six months alone, such loans have grown by NPR 11.70 billion.

Despite the rising activity of small and medium investors, large investors continue to hold a strong grip on the market. Loans exceeding NPR 10 million have reached NPR 106.11 billion, accounting for more than 70 percent of total margin lending. This category recorded a 7.3 percent increase, equivalent to NPR 7.18 billion, in the last six months.

In the mid-level segment, loans between NPR 5 million and NPR 10 million rose to NPR 18.07 billion, with an increase of NPR 2.04 billion in the recent period. This group has shown the highest growth rate among all categories.

Similarly, loans between NPR 2.5 million and NPR 5 million reached NPR 19.38 billion, while loans below NPR 2.5 million stood at NPR 8.82 billion. Although growth in the smallest segment remains relatively lower, the continuous rise reflects increasing access and participation of the general public in the stock market.

The central bank’s flexible policy on margin lending under its monetary policy review and banks’ preference for share loans as relatively secure investments have supported this growth. Furthermore, expectations of further interest rate reductions and technical improvements in the market are likely to increase demand for such loans in the coming months.

However, experts have warned that the concentration of a large portion of credit among major investors may expose small investors to higher risks. They stress the importance of proper risk management and informed investment decisions.

Overall, recent data suggests that while small and medium investors are gradually strengthening their presence in Nepal’s stock market, large investors continue to dominate, maintaining significant influence over market movements.