Nepal's stock market has experienced a significant slowdown in trading activity since the formation of the new government led by Prime Minister Balen Shah. Trading turnover on the Nepal Stock Exchange (NEPSE) has been declining continuously since March 22 (Chaitra 8), reflecting weakening investor confidence and increasing market uncertainty.

Before the new government took office, daily trading turnover had reached as high as Rs. 23.17 billion on March 27 (Chaitra 13). However, by June 30 (Ashar 16), daily turnover had fallen below Rs. 3 billion, indicating a sharp contraction in market participation.

Since the government assumed office, NEPSE has recorded 64 trading sessions, with the market closing higher on only 23 occasions. Although the market briefly gained momentum around the national budget announcement, the positive sentiment failed to sustain after the budget was unveiled.

Investor sentiment deteriorated further after former Prime Minister KP Sharma Oli and former Home Minister Ramesh Lekhak were arrested shortly after the new cabinet's first meeting. When the market reopened following the arrests, NEPSE plunged by more than 71 points, followed by additional heavy declines in the subsequent sessions.

The government's aggressive governance and anti-corruption campaign targeting major business figures has also weighed on market sentiment. Finance Minister Dr. Swarnim Wagle acknowledged that investigations into major financial sector irregularities have created uncertainty, although he maintained that honest businesses have nothing to fear.

Meanwhile, the government increased the capital gains tax by 2.5 percentage points through the new budget. Although the Finance Minister said the move addressed demands from market participants, many investors believe the higher tax has negatively affected market confidence.

As a result, investors remain in a "wait-and-watch" mode. Buying interest has weakened while sellers are also reluctant to trade. During the past 20 trading sessions, NEPSE declined on 16 days, with total daily turnover exceeding Rs. 5 billion only once.

On Tuesday, the benchmark index closed at 2,608.33 points, its lowest level since Poush 9, 2082, while total turnover stood at approximately Rs. 3.25 billion.