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Central bank tries to calm stock investors

The central bank today asked the investors not to be buoyed by rumours at the stock market.

The central bank’s move to clip the wings of banks and financial institutions on short-term investment on the stock market has been blamed for the freefall of the stock market by over 62 points in two days.

Nepal Rastra Bank has clarified that the cap on short-term investment in stocks was introduced to discourage trading of shares for speculative purpose that would not impact long-term investments.

Issuing a press release late in the evening, the central bank also asked not to panic ass it has been watching the market carefully.

Yesterday, the stock market plunged by 37.61 points or 3.82 per cent to close the market at 947.84 points. Whereas the market shed 25.98 points, or 2.74 per cent, to close at 921.86 points.

The massive selling pressure from the small investors has pulled the market down in the last two days, according to the brokers.

The central bank has instructed the banks and financial institutions to bring down their investment in stocks to one per cent of the core capital within mid-July next year.

The central bank has – on August 20 –  told the banks and financial institutions that their investment in ‘trading book activities’ has been gradually increasing and needs to be controlled immediately in an attempt to reduce their exposure to risky investment tools and limit investment in trading to one per cent of core capital within mid-July, 2015.

The interpretation of the directives by the big investors has been blamed for the free fall of the stocks.