Why NEPSE Failed to Sustain Above 3,000? Over Supply, IPO and Promoter Lock-in Explained

Nepal’s stock market has repeatedly struggled to sustain momentum above the psychologically important NEPSE 3,000 level. One of the major factors behind this weakness appears to be the continuous over supply of shares in the secondary market.

The supply pressure has mainly come from new IPO listings, Right Shares and Promoter Lock-in Shares becoming eligible for trading. As fresh shares continue to enter the market, demand has often struggled to absorb the additional supply.

However, the supply situation may be approaching an important turning point.

Over Supply Was a Major Challenge for NEPSE

The Nepal Stock Exchange (NEPSE) has faced significant selling pressure whenever the market attempted to establish a sustainable move above 3,000.

The issue was not necessarily a lack of investor interest alone. A continuous increase in the number of tradable shares created a structural Demand-Supply Imbalance.

New IPOs increased the number of listed shares, Right Share issues added additional supply, while the opening of Promoter Lock-in Shares created another source of potential selling pressure.

As a result, even when buying interest increased, the market had to absorb a substantial amount of fresh supply.

Right Share Supply Appears to Be Moving Toward Control

The pressure created by Right Share issues in Nepal appears to be moving toward a more controlled situation.

If the issuance of additional shares through Right Shares becomes more disciplined, the secondary market could experience comparatively lower supply pressure in the future.

This could be an important positive factor for NEPSE and Nepal’s Capital Market, particularly if investor demand continues to recover.

New IPO Supply Could Also Be Controlled

Another important factor is the future supply coming from New IPOs in Nepal.

If IPO approvals and issuance are managed more carefully, the amount of fresh supply entering the secondary market could decline.

A controlled IPO pipeline does not necessarily mean stopping IPOs. Instead, better coordination between IPO size, market capacity, investor demand and overall capital market conditions could help create a healthier Demand-Supply Balance.

For NEPSE, this could reduce one of the major sources of long-term supply pressure.

But the Promoter Lock-in Flood Is Still Continuing

Despite the improvement in Right Share and potential IPO supply management, one major challenge remains — Promoter Lock-in Shares.

Shares released after the completion of the three-year lock-in period can significantly increase the potential supply available in the secondary market.

According to the information discussed in the market, among the 72 companies approved during Ramesh Hamal’s tenure, the lock-in period of 10 companies is still scheduled to open by Mangsir 4, 2083.

These companies include:

• BGWT
• MANDU
• HATHY
• MSHL
• SONA
• MMKJL
• CKHL
• VLUCL
• NWCL
• MKCL

Once the respective lock-in periods expire, these shares may become an additional source of supply for the market.

Therefore, investors should closely monitor the Promoter Lock-in Opening Calendar and the potential impact on individual stocks as well as the broader NEPSE Index.

What Happens After This Supply Is Absorbed?

The more interesting question is what happens after the market absorbs the supply from these companies.

If NEPSE successfully absorbs the upcoming promoter and locked-in share supply, the market could enter a relatively lower-supply period.

Based on the market view presented, there may not be another major wave of supply for approximately 17 months after the current group of lock-in shares is absorbed.

This could create an important window for the Nepalese stock market.

Could a New Bull Market Begin During the 17-Month Supply Gap?

A period of approximately 17 months with comparatively lower large-scale share supply could become favorable for the market if other economic and financial conditions also remain supportive.

According to the view attributed to SEBON Chairman Gopal Bhatt, greater control over new IPO approvals could potentially help create a healthier market environment.

If new IPO supply is controlled while investor demand, liquidity and market confidence improve, the resulting Demand-Supply Imbalance could shift in favor of buyers.

This could potentially provide the foundation for a new NEPSE Bull Run.

However, a lower supply environment alone cannot guarantee a bull market.

The future direction of NEPSE will also depend on:

• Interest rates
• Banking sector liquidity
• Monetary policy
• Corporate earnings
• Investor confidence
• Government and regulatory policies
• Economic growth
• Market valuation
• Institutional participation
• Foreign and domestic investment sentiment

Therefore, the 17-month period should be viewed as a potential opportunity rather than a guaranteed bull market.

The Next Supply Cycle Could Come Later

The supply cycle in Nepal’s capital market does not permanently disappear.

After the current group of promoter lock-ins is absorbed, companies whose IPOs were approved during the tenure of Santosh Narayan Shrestha could eventually reach the end of their respective lock-in periods.

When those lock-in periods expire, another significant amount of shares could potentially enter the secondary market.

This means Nepal’s stock market will continue to experience periodic Share Supply Cycles.

The challenge for regulators is therefore not simply to reduce supply but to maintain a sustainable balance between:

New IPOs + Right Shares + Promoter Lock-in Releases + Market Demand + Liquidity

Supply Management Could Become a Key NEPSE Factor

For the Nepalese stock market, supply management could become one of the most important structural factors in determining long-term market behavior.

A healthy capital market requires new companies to raise capital and existing companies to expand. IPOs and Right Shares are therefore essential components of capital formation.

However, the timing and size of new share issuance should ideally be consistent with the market’s ability to absorb additional supply.

If too many shares enter the market within a short period, existing investors may face dilution of demand and increased selling pressure.

On the other hand, if new supply is managed appropriately, the market may have more time to absorb listed shares and develop stronger liquidity.

What Investors Should Watch Now

Investors following NEPSE Technical Analysis and Nepal Stock Market Analysis should closely monitor the following factors:

1. Promoter Lock-in Openings

Track companies approaching the end of their three-year promoter lock-in period.

2. New IPO Approvals

Monitor the number and size of new IPOs approved by the regulator.

3. Right Share Announcements

Watch for companies planning large Right Share issues.

4. Market Liquidity

Banking liquidity and interest rates can have a major impact on investor participation.

5. NEPSE 3,000 Level

A sustained move above 3,000 with strong turnover and market breadth would be technically important.

6. Trading Volume and Turnover

A price breakout supported by strong market turnover would generally provide greater confirmation than a low-volume move.

7. Investor Sentiment

Confidence among retail and institutional investors remains an important driver of market momentum.

Conclusion: Could Supply Reduction Trigger the Next NEPSE Bull Run?

The inability of NEPSE to sustain above 3,000 can be viewed through several lenses, but persistent share supply pressure has clearly been an important market concern.

The pressure from Right Shares may be moving toward better control, while tighter management of New IPO issuance could potentially reduce future supply.

The immediate challenge, however, remains the release of Promoter Lock-in Shares from companies such as BGWT, MANDU, HATHY, MSHL, SONA, MMKJL, CKHL, VLUCL, NWCL and MKCL.

If the market successfully absorbs this supply and subsequently enters a period of approximately 17 months without another major wave of supply, the environment could become more favorable for a sustained market recovery.

If this period is combined with improving liquidity, lower interest rates, stronger corporate earnings and rising investor confidence, it could potentially create the conditions for a new NEPSE Bull Market.

However, investors should remember that reduced share supply does not automatically guarantee a bull market. Market direction ultimately depends on the interaction between supply, demand, liquidity, valuations, earnings and investor sentiment.

For investors and market participants, understanding the NEPSE Supply Cycle, Promoter Lock-in Shares, IPO Supply and Demand-Supply Dynamics could therefore be increasingly important in evaluating the next major move of Nepal’s stock market.

This article is for informational and educational purposes only. It does not constitute investment advice, a recommendation to buy or sell securities, or a guarantee regarding the future direction of NEPSE. Investors should conduct their own research and consider appropriate risk management before making investment decisions.