Capital market reform plan sparks rally in NEPSE, turnover nearly doubles

The stock market surged on Tuesday as investors responded enthusiastically to the government’s newly announced capital market reform plan, which includes significant cuts in capital gains tax and measures aimed at strengthening the market.

The Nepal Stock Exchange (NEPSE) index climbed 48.57 points, or 1.87%, to close at 2,633.62 points. All 13 sectoral indices ended higher, led by the non-life insurance sector, which gained 2.82%. The life insurance and investment sectors rose 2.59% and 2.52%, respectively.

Investor participation also picked up sharply. Total turnover reached NRs 8.29 billion, up from NRs 4.68 billion in the previous session and the highest level in roughly two months. The market last recorded a similar turnover on June 30, when transactions totaled NRs 8.41 billion.

Read also: Government proposes capital gains tax cut in 21-point capital market revival plan

A total of 347 securities changed hands, with more than 20.3 million shares traded. Share prices of 265 companies increased, while 12 declined and one remained unchanged.

Dhaulagiri Microfinance recorded the biggest gain, rising 14.96%, followed by Sindhu Bikash Bank, which gained 11.03%. Among the most actively traded stocks, Reliance Spinning Mills led with transactions worth NRs 327 million, followed by Shivam Cement with NRs 315.6 million.

Tax cuts at the center of reform package

The market rally came a day after Finance Minister Dr. Swarnim Wagle unveiled a capital market strengthening and revival plan containing more than 20 measures.

One of the key proposals is to reduce capital gains tax on individual investors. Under the revised arrangement, the tax on shares held for less than one year would be reduced to 5%, while the rate for shares held for more than one year would fall to 3.75%, according to the government’s announced framework.

The plan also proposes allowing investors to offset investment losses against gains when calculating their tax liability.

Other measures include revising investment limits for banks and financial institutions, allowing listed companies to undertake share buybacks and developing new market benchmarks. The government has also proposed measures related to stock splits and other mechanisms intended to improve market liquidity and investor participation.

Banks and financial institutions currently face a six-month holding requirement for certain investments; the reform plan proposes reducing this period to 45 days.

Market participants said the government’s initiatives have helped restore confidence following a prolonged decline in the market.

The NEPSE had fallen by over 300 points since the formation of the new government, making Tuesday’s rally an early sign that the reform package may be helping to revive investor sentiment.