Capital Markets & Investment: Valuation Frameworks & Market Efficiency
“Empirical inquiry into secondary market pricing behaviors, market microstructure anomalies, and the case for institutional market-making in NEPSE.”
Strategic Implication: Valuation frameworks, institutional market-making, and structural reforms for secondary market efficiency in Nepal.
## Structural Maturity in Capital Markets
Developing equity markets often oscillate between retail sentiment-driven momentum and macroeconomic fundamentals. For NEPSE to mature into an efficient capital-allocation platform, structural governance must advance in lockstep with trading infrastructure.
### 1. The Role of Institutional Market Makers Currently, high retail participation rates amplify cyclical volatility. Introducing dedicated institutional market-making and quantitative liquidity providers stabilizes bid-ask spreads during market drawdowns.
### 2. Rigorous Fundamental Valuation Investors and fund managers must anchor decisions to discounted cash flow (DCF) models, normalized return on equity (ROE), and risk-adjusted cost of capital, rather than speculative rumors.
### 3. Market Integrity & Information Transparency Consistent corporate disclosure and strict insider-trading enforcement build retail trust and attract patient institutional capital.