Nepal Market Forecast Based on Macro Data
Using NRB's 8-month data for FY 2025/26, what can we reasonably forecast for Nepal's markets in the remaining months and beyond?
Interest Rate Forecast
Direction: Likely to hold or rise slightly. With CPI at 3.62% and accelerating, NRB has no room to cut. The repo rate at 5.0% may stay or inch higher if inflation breaches 4%. CB lending rates likely to remain 8-9% range.
Inflation Forecast
Direction: Likely 3.5-4.5% for the remaining months. The 8M average of 2.13% will rise as recent high months get more weight. Annual average could end at 2.8-3.5%. Monsoon food supply will be key — a good harvest moderates food inflation.
Exchange Rate Forecast
Direction: Continued weakness likely. NPR follows INR, and INR is under pressure from global dollar strength. NPR could test 150/USD if US rates stay elevated. However, Nepal's strong reserves (11-12 months) prevent a sharp collapse.
NEPSE Forecast
Direction: Range-bound 2,600-3,000. Without a rate cut catalyst, NEPSE lacks momentum. Rising deposit rates (4.54%) compete with equities. Upside limited unless NRB signals easing. Downside protected by 3.99% GDP growth and remittance-supported consumption.
Remittance Forecast
Direction: Strong but growth may moderate. The 37.67% growth rate is partly from Malaysia reopening (one-time effect). Annualized remittances could reach Rs. 2.0-2.2 trillion — still very strong but the growth rate may slow to 15-25% in the second half.
Conclusion
Nepal's market outlook is stable but not exciting. Interest rates are unlikely to fall soon, NEPSE is range-bound, and inflation remains the key wildcard. The strongest conviction call remains on hydropower and banking as structural winners.