‘This period of share market can be taken as a golden era which is just booting and yet to start up’ – Tara Prasad Phullel
The stock market of Nepal is in violent trend nowadays. It has been in a sloppy trend if we analyze the index of few months but is in higher level than it was a year ago. Stock market in Nepal was introduced on 13 January 1994. Share Market of Nepal constitutes of US$ 11.93 Billion capital and about 5 million investors with 5-8 lakhs of active traders. Even though we have seen a lot of rising and downfall in NEPSE index, there are many reasons the index should develop from the point it is on now.
Share Market constitutes of companies with various market prices. As a new investor or while purchasing a share of new company the thing to look at is the background and possibilities of that company, not the price it is at or the rate at which it is rising or falling. Ben Graham also once said, “Investors should purchase stock like they purchase groceries, not like they purchase perfume.” It is never certain that one will always have profit in their investments they make in stock market the next day of their purchase. Actually, stock market should never be taken as a lottery offer that if you win, will be a millionaire and if you lose, you will waste your money. It is actually a platform to secure your investments. Secured, because the whole market doesn’t rely on financial bearing of few investors, and neither holds dependence with any sole project but is believed to be a financial marker of the whole nation that responsibly fluctuates with changes financial factors of the nation.
This period of share market can be taken as a golden era which is just booting and yet to start up. No such determining factor has been made to drastically convince or totally regret investors on investing on share market of Nepal. Hence, this lays behind an opportunity for improving market on different factors which will ensure the index to reach a peak. Some of them include:
Online Trading System: There are 95% of people on Nepal having access to communication through mobile phones directly or indirectly. Almost all the investors in share market can be found under that percentage. Despite this reality, they have to travel to the brokers’ office manually and rely on them for their purchase or selling. However, possibilities are that online trading system will be introduced in the near future. There was a legal dispute for this agenda but the court has already decided in favor of regulating it so we may soon have this system in practice. When online trading system comes in practice, one can trade while taking a bath in their bathtub and isn’t compelled to contact broker. Even the NRN investors will be attracted to the national share market. This naturally increases the daily transactions and will possibly increase capital of the market, which is of course positive for the future market.
Extensions of Sub Brokers outside valley: There are a total of about 50 active brokers from which investors trade their shares. All those brokers are piled in this valley and the people outside valley do not have direct access or have limited access to them. However, in the near future the brokers will extend their branches sufficiently outside valley and new brokers will be established in the major cities of Nepal like Biratnagar, Butwal, Pokhara, Birgunj and so on. This provides the opportunity to each and every willing people outside the valley which will add a major benefit to the market scenario.
Commercial Banks to function as brokers: One of the most anticipated and on the same hand—controversial changes that are yet to be made in the Nepali stock market is providing license to “A” class banks in Nepal to function as stock brokers. Since commercial banks hold more responsibility towards market and also are believed to take trading as non-profitable act but a part of work of bank itself, banks are more convincing for the investors rather than brokers whose main source of income is the commission of the transactions made for trading. More convinced the investors are, the higher the index will be.
Capital increment of banks: As per the directive issued by Nepal Rastra Bank, commercial banks have to increase their paid up capital to Rs. 8 billion. Rs. 8 billion by the end of fiscal year 2073/2074, which is not the end as it is likely to continue with further capital increment plans as indicated by NRB’s governor. As per the reports from banks, the capital increment plan to reaching to 8 Arab has significantly increased efficiency with decreasing NPL and P/E ratio, increasing Reverse & Surplus as well as EPS.
International new software for NEPSE: The old software which is in use by the Nepal Stock Exchange has lots of drawbacks which sometimes brings lots of problems. New software for NEPSE is already considered to facilitate easy and convenient online facilitation and transparency.
For easy and secured trading changes like introduction to DEMAT accounting, plans of brokers being allowed to function as margin lenders and dealerships, fast track processing and introduction of investors identity card facilitation. These changes will act as catalysts and invite more investors. They will even console investors to increase their investments.
In SAARC countries, indices are comparatively higher and more developed in comparison to Nepal’s share market. As per technical analysis, fundamental analysis and all the indications at current scenario, NEPSE will march further and gain new heights. Finally, marking the words of famous investor Warren Buffet, successful investments takes time, patience and discipline. No matter how great the talent or effort, some things just take time: you can’t produce a baby in one month by getting nine women pregnant. The same holds true for stock market.
Mr. Tara Prasad Phullel is the vice president at Nepal Share Laganikarta Sangh.