NEPSE INSIGHTS | CURRENT MACROECONOMICS SITUATIONS | UNDERPERFORMANCE OF LISTED COMPANIES
Since July 2022, the NEPSE index has been in a sideways trend, fluctuating between 1800 and 2200 points. The bulls have been pushing it up from 1800 points, not letting it close below that level, while the bears have been pushing it down, not letting it sustain above the 2200 zone. However, only the banking sector and a handful of organizations seem to be undervalued to date. Either companies must attract investors with attractive reports or investors must pay them at not-so-satisfactory values.
The greatest flaw that can be seen is that most of the listed stocks are not performing well. Very few companies are seen to have long-term wealth maximization strategies. We do not know what is lacking behind, but it is sure that very few companies have really grown and remained consistent over time, satisfying their customers. Meanwhile, most of the companies are underperforming.
The current situation in Nepal calls for a serious approach from all stakeholders, including government, businesses, and investors. The government must take effective measures to boost the economy, create jobs, and support small businesses. Businesses must re-evaluate their strategies and come up with innovative ideas to grow and remain sustainable. Investors must be cautious while making investments and must look for long-term growth opportunities rather than short-term gains.
In conclusion, the macroeconomics of Nepal is going through tough times, but it is not the end. With proper planning and execution, the economy can be revived, and businesses can grow.
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Macroeconomics of Nepal in short
The economic indicators of Nepal in mid-March 2023 show mixed results. The year-on-year consumer price inflation rate was recorded at 7.44%, which is higher than the target of 7% set by the NRB. However, the trade deficit decreased by 17.9% due to a decrease in imports by 19.1% and exports by 29.1%. Remittances increased by 25.3%, and the Balance of Payments (BOP) remained at a surplus of Rs.148.11 billion. The Gross Forex Reserve stood at USD 10.69 billion, which is sufficient for financing merchandise and service imports for 9.4 months. However, total revenue collection decreased by 14.89%, and total expenditure increased by 15% on a year-on-year basis. The Asian Development Bank (ADB) and the World Bank project Nepal’s GDP growth rate for FY 2022/23 to be at the 4% level, mainly due to the contraction in the construction sector, lack of private consumption due to inflation and subdued credit growth, subdued investment due to slower imports and global headwinds. To address these issues, the government is expected to devise an expansionary fiscal policy with more capital spending to boost private consumption and soothe problems in the construction sector. The NRB’s review on Monetary Policy for Q3 is not expected to bring many changes in policy interest rates, as the economic indicators are on the positive side.