In Nepal’s case, the market seems to be inversely proportional to the interest rate and availability of excess investable funds. While the market has already eaten and digested the downfall of 50 overvalued companies’, we have to see the further developments in this case of 4/12 crore ceiling.
Baburam Bhattarai’s statement came during an extremely severe liquidity crunch. When deposit increased by Rs 40Billion in the 1st six months of FY66/67, banks provided extra Rs 73Billion loans. CCD Ratio jumped over 120%. Remittance growth had slowed drastically. Loadshedding was at its peak. Industries had little production due to which major chunk of money was used in imports. Interbank lending rate was between 10% – 16% (currently it’s about 4%, was less than 2% last year). All these data is from [here](https://fncci.org/old/downloads/interact_mahaprasad.pdf) (interestingly, this presentation made 12yrs ago was by current governor MP Adhikari).
Interest rates on savings and fixed deposits soared up to 14%. Most attractive was by Royal Merchant Banking on savings account with 9% (or was it 10%) interest rate cumulative daily instead of quarterly. Yes, friggin’ daily. Bank of Asia had fixed deposit interest rates of 12% paid monthly. Jati lakh fixed deposit ma rakhyo, tyeti hazar harek mahina interest aune. Imagine lending rates.
Similar liquidity shortages during 2017-2020.
Links: [Baburam Effect](https://thehimalayantimes.com/business/ae%cb%9cbaburam-effectae-pushes-market-up) *(opposite of bad news)* | [Monetary Policy 2010/11](http://archive.nrb.org.np/ofg/monetary_policy/Monetary_Policy_(in_English)–2010-11_Report.pdf) | [2017 News](https://thehimalayantimes.com/opinion/liquidity-crunch) | [2019 News](https://country.eiu.com/article.aspx?articleid=1867702370&Country=Nepal&topic=Economy&subtopic=Forecast&subsubtopic=Monetary+policy+outlook)
There is this “theory” that market never tops out on bad news, and never bottoms out on good news. Political matters, policy changes, good news/bad news do not seem to have a lasting effect. Market runs on its own cycle. Entire worldwide lockdown and pandemic turned out to be the start of a massive bull run, and not just only in Nepal. Until interest rates are within single-digits, we don’t need to worry imo. Chasing the bull top and bear bottom will only give more frustration. If we have good money management and risk management, we need not worry.