Here is a brief analysis from the Institute for Development Studies (IfDS):
...The share price of the commercial banks listed in the stock exchange is very high with no relation whatsoever with the earnings of the concerned institutions. As a result, the capitalized value of the share price of the seventeen commercial banks is Rs. 259 billion, compared with the face value of not exceeding Rs. 30 billion. The main question that must be taken into account seriously by the monetary authorities is the continuity of such bubble in the share price. If such bubble bursts due to any reason, the country will be in a very difficult situation both politically and economically, as the experiences of several developed countries of the recent past suggest.
Nepal's stock market is so insulated to political situation and fiscal and monetary policies that the effect of a change in these variables would be felt in the stock exchange at the beginning of the next such change in the variables! Okay, this might seem a little inflated, but the reality is that the time lag is very long. Also, there are instances when the stock market was indifferent to the changes in fiscal and monetary policies. How could this happen?
Note that there are 21 commercial banks, 58 development banks, 79 finance companies, 12 micro credit banks in Nepal. This for a population of around 26.4 million. Sadly, the handful of commercial banks are awash with liquidity and the poor people are yet to see this being channeled for investment/development purposes.
