At how much discount are mutual fund schemes being traded on NEPSE? Is it a good time to invest in mutual funds?

Thu, Feb 27, 2020 2:31 PM on Exclusive, Financial Analysis, Latest, Mutual Fund,

The mutual fund sector of the Nepalese stock market consist of 17 close end schemes and one open end scheme. Out of these only 13 schemes are currently traded on the secondary market. While Siddhartha Investment Growth Scheme 2 (SIGS2), Citizens Mutual Fund 2 (CMF2), Sunrise First Mutual Funds (SFMF) and NMB50 are listed but not being traded, NIBL Sahabhagita Fund (NIBLSF) is the only open end mutual fund scheme currently with latest NAV at Rs.10.87 per unit as of February 21, 2020.

As the market has positively grown in the past few weeks, most mutual fund schemes were able to report a rise in the Net Asset Value (NAV) per unit by the end of Magh 2076. However, a relative growth could not be seen in the LTP of the schemes that are being traded. To check if the scrips of the scheme are being traded at discount or premium, the latest NAV of each scheme has been compared with their LTP on February 26, 2020.

As per the latest reports, the highest NAV was published by NIBL Samriddhi Fund 1 (NIBSF1) at Rs.11.97 per unit followed by Siddhartha Equity Fund (SEF) at Rs.11.45 per unit. The lowest NAV in the industry was posted by Laxmi Equity Fund (LEMF) at Rs.9.82 per unit, being the only scheme to post a NAV below Rs.10 per unit. The average NAV of the industry stands at Rs.10.82.

Currently, all the schemes are being traded at discount. The level of discount varies between Rs.1.66 (NIBL Pragati Fund) and Rs.0.07 (Laxmi Value Fund-1). Seven mutual fund schemes are trading at a discount of more than Rs.1 per unit.

The table above reflects how the market is currently undervaluing mutual fund schemes. This presents as a good opportunity for investors who want to make safe investments and cannot give the required attention to their portfolios. The market is trending upwards, which will gradually enable the schemes to realize decent profits resulting in an increase in the NAV. The LTP of the schemes are expected to behave in the same way, after which the investors may choose to hold the scheme until maturity or disinvest after booking profit. In any case, the current market scenario is a good time to invest in mutual fund schemes for investment safety and decent returns.