The Nepal Stock Exchange (NEPSE) Index took a 22 percentage point tumble last week, leading to fisticuffs at the exchange between retail buyers and sellers, brokers and officials of the exchange. Around 1 pm, 28 February, trading was going on as usual, when investors began banging on the glass panes separating the trading floor and the visitors' gallery. Blue chip banks, whose prices had been on a downswing for the last three months, were falling even lower, faster. Investors say the 27 brokers at the NEPSE are fixing prices in collusion with NEPSE officials.

Trading has become saner since, and both the Nepal Stock Exchange Ltd and the Securities Board (SB) are looking at what could have gone wrong. "There's more that could be done about transparency at the level of transactions and corporations," says Damber Prasad Dhungel, chairman of the securities board. That says it all, really. A cursory look at the prices and volume of stocks traded over time reveal that some bank stocks are changing hands several times faster than others-something the SB is now looking into. "We've met brokers and investors and all have agreed to ensure that more information is available to all investors and brokers," says Madan Raj Joshi, general manager of the NEPSE.

Analysts agree that some banks are selling faster and in larger volumes as compared to others, for no apparent reason, and that this could be the place to start investigations. Among them are the Bank of Kathmandu (BOK), the Nepal Bangladesh Bank (NB) and the Nepal Industrial and Commercial bank (NIC). NIC, which appeared on the charts selling at a high of Rs 610 in mid-July 2000, was trading at Rs 710 in December. On 28 February NIC stocks plunged to Rs 430. NB bank stocks have seen a similar trend-the price climbed from Rs 1,505 last July to reach Rs 3,050 in December, only to tumble to about Rs 2,100 last week. BOK shares sold at a high of Rs 1,000 last July, shot up to Rs 1,600 in December, and tumbled to Rs 1,040 on 28 February.

Banking stocks in Nepal have followed a path similar to IT stocks at exchanges in overseas markets, and the soaring prices were partly driven by a "boom syndrome". The lack of effective monitoring, mis-interpretation of Nepal Rastra Bank (NRB) directives and lack of corporate transparency are other reasons that explain the freak price movements. NEPSE officials said that misinterpretation of the NRB directive to banks to have Rs 500 million as paid-up capital reserves by the end of this fiscal year partly fuelled the boom. The directive has since been re-interpreted to mean that this amount could also include reserves, and this sent the stocks tumbling. And that came on the heels of the realisation on the part of investors who expected to receive rights and bonus shares that it would not be as straightforward as they hoped.