The increasing dominance of the hydropower sub-group in Nepal’s secondary stock market (NEPSE) was once again evident in last week’s trading. Over the five trading days, shares worth a total of NPR 47.895 billion were exchanged. According to NEPSE data, hydropower companies alone accounted for NPR 30.3924 billion of that total - representing 63.58% of the weekly turnover. This data confirms the growing influence of the hydropower sector in the stock market.

The number of listed hydropower companies has seen a notable rise in recent years. As of last Thursday, 91 hydropower companies were listed on NEPSE. Most of the newly listed companies in the past week also belong to this sector. Experts attribute this dominance to the increasing number of hydropower companies entering the market.

Currently, 89 companies have applied for IPO approval from the Nepal Securities Board, with the total value of proposed offerings standing at NPR 56.7093 billion. Of these, 43 companies are from the hydropower sector alone, seeking approval to issue 193 million shares worth NPR 19.44 billion. Other applicants include nine companies from the hotel and tourism sector, three from the investment sector, 18 from production and processing, one finance company, three microfinance institutions, and 12 from other sectors. Experts anticipate that the trend will continue, with an increasing share of listed companies in NEPSE being hydropower firms.

In terms of last week’s trading by sector, banks and financial institutions and insurance companies accounted for 17.23% of the total turnover. Investment companies contributed 10.21%, production and processing 2.55%, others 3.18%, trade and tourism each 0.64%, and founder shares 2.18%.

Historically, banks, financial institutions, and insurance companies dominated the stock market. Just two to four years ago, they held more than 80% of the total share turnover. However, due to ongoing mergers and acquisitions, their share has gradually declined. Despite this, they still hold the largest portion of total market capitalization.

The decline in the number of financial institutions due to consolidation has not significantly affected the total number of listed shares - unless there’s an unequal share matching ratio during mergers. Even when two listed institutions merge and one ceases to exist, the number of listed shares often remains steady, helping maintain their dominance in market capitalization.

As of the end of February, banks, financial institutions, and insurance companies represented 53.2% of total market capitalization among listed companies. Hydropower companies followed with 15.7%, investment companies with 7.6%, production and processing industries with 5.4%, trade companies with 5.1%, hotels with 2.6%, and other subgroups collectively held a 10.4% share.

Last week, shares were traded on all five days. NEPSE recorded gains on Tuesday and Wednesday but declined on Sunday, Monday, and Thursday. Overall, NEPSE increased by 38 points over the week - gaining 63.28 points on two days and losing 25.46 points over the remaining three. The index rose from 2,623.83 points on Wednesday to 2,661.64 points by Thursday’s close.

In total, 430,547 transactions took place last week, with 118.93 million shares traded. NEPSE reported the total transaction value reached approximately NPR 48 billion.

Source: Kantipur