Considering the election and other positive scenarios, the market might witness a 10 to 15 percent jump from the current levels in a few months.

Director of Agrawal Securities Pvt. Ltd. (broker no. 6) Anuj Agrawal, in a conversation with ShareSansar, spoke about his long association with Nepal’s stock market, shared the secret behind winning investors’ trust and explained why the secondary market will look better in the coming days.

What changes have you seen in Nepal’s stock market over the years?

I have been associated with the share market from day one of its beginning in Falgun month of 2050.

While a lot of things have developed since that time, much has yet to be done to fully develop the market. Earlier, we did a lot of things like clearing and settlement manually, but now they have been computerized, and going online after the CDS comes in full operation would be a big leap for the share market. Dematerialization of shares is a very good development. There are other possibilities that we hope will develop with time.

There is lack of broker-friendly CDS system. For example, we have been carrying out trading and settlement based on a bank guarantee which should be enough, but brokers have been asked to submit collateral of Rs 10 lakh. There have been talks to change that and NEPSE and CDS have shown some flexibility on the issue. In case of defaulters they have introduce rules that are not satisfactory. They have not differentiated the criteria of defaulters. We only had three four demands and they have been addressed, and now many brokers are in the process of registering themselves as depository participant at the CDS.

Why is Nepal’s stock market dominated by Banks and Finance Institutions?

Many production companies here are not transparent. Some like Unilever, Bottlers Tarai Nepal are transparent because they are multinational companies and they have their own rule and regulations. Others function more as a private limited company though they call themselves public limited company. The activities and transactions of the so-called public limited companies resemble that of private limited companies. Also, private companies want tax reliefs and flexibility on bank loans to get publicly listed. Losing ownership could be another of their concerns. They have been running their companies in their own way. If they lose ownership, they will be answerable and they don’t want to disclose a lot of things

If you look at the capital market of other countries, you’ll see that they do not sustain because of BFIs only. It is the growth and developments of the manufacturing companies that drives the capital market. In India, for example, when the data related to manufacturing are released, that’s when the market falls or goes up. But here there always have been dominance of finance companies and the market responds when they release their data. We know that government has been thinking to do something about it, but as in the case of other things, it is limited to thinking only, not implementation. But if concerned authorities take it seriously and implement these plans, it would be a great thing for the market.

Why are all broker firms situated in Kathmandu only?

There are many problems for establishing brokerage firm outside of Kathmandu. Initially we were 23 brokers and we had been to assigned five sectors with a view to cover the five development regions. Some of us even went to those places. But in most of the places we studied, the knowledge about shares among people was either almost nil or they lack proper understanding on the topic.

There are regulatory problems as well, but for expanding presence of brokerage firms, lack of education is the biggest hurdle. SEBON had organized some awareness programs in the past and they have helped to an extent to educate the people. But more than that, it is important to have a subject related to capital market or share market for students because we have to go from the ground level.

When we were told to go outside the valley we were promised a lot of things but they were not addressed later which created problems. Some of our friends had gone outside the valley like Birgunj, Pokhara, Biratnagar, but many of them came back because they could not sustain their offices in those places. Some are still working but the problems have remained where they were. Problems related to signature verification and ownership transfer haven’t changed. And there is the fear of losing documents sent through courier, many of these problems would be solved if transactions are done online.

How have you managed to remain among top five brokers for so long?

My father used to tell me to be honest, never do wrong, and never lie to people. That is the ethics I still hold on to. I had to work very hard to create this market, to build this company, to be where I am today. I used to visit the market everyday at around 4:30 and share my views with other people. That helped me build a following slowly as people liked what I suggested. So, my honesty and the way I gave suggestions to people is what earned me their love and trust and that is why I have been able to be among top five brokers. To win the trust of people you have to be persistent, honest and serious toward your work.   

What inspired you to become a broker?

It was my uncle Jagdish Agrawal who motivated me to work as a broker. At the time he established the firm, I had very little knowledge about the share market. I was just 23 years old then. It was his guidance and my interest in the share market that helped me learn the ropes of the trade gradually. If you are interested in something you must go deeper to understand that topic. I used to sit around my seniors and listen what they said and how they talked about share market. So I learned by observing.

Why is the share market looked at by many as a gambling house?

Investment, trading and gambling, you can look at the share market whichever way you want. As an investment, you get involved with long term plans. As for gambling, you use unnatural methods to make the market volatile. When Baburam Bhattarai was the finance minister he called the share market a gambling house. He must have some reason for saying it. Other thing is that you can just trade in shares on a day to day basis. It is open for all these activities and people have opted for ways that suits their interest.

How would the market look a few months down the line?

Looking at the current scenario, the market should be balanced and profitable in the period between three to six months from today. In the recent times, there have been many institutional buyers, such as finance companies, insurance companies, mutual funds and the government is planning to open the sector to NRN as well. These factors are definitely going to have positive impact on the market. In addition, after CDS is fully implemented, we would not have to face the hassles we have been facing currently. After shares are dematerialized, it will be easier for not just brokers but for general investors as well.  Again, considering the election and other positive scenarios, the market might witness a 10 to 15 percent jump from the current levels in a few months.

How will the conversion of promoter shares to public shares affect the market?

This process has been going on for three four years. Whenever talks about conversion begin, market sees a decline. I don’t think promoters are in panic mode at present as they are not short of funds right now. Promoters are not under any compulsion to sell their stakes and they would not want to lose their holding. Also, if it had come at a time when the market was low, it would have affected the market severely, but this is a boom period so the impact would not be visible much.

Do you think a lock in period is necessary for IPO issued to mutual funds?

 IPO issued to mutual funds must come with a lock-in period. Generally lock-in periods are for 3 years. But instead of three, there should be a lock-in period of 6 months to one year. At least one must wait to see how a company performs. It should be like giving them a trial period. Investor forums and general investors have approached SEBON with the issue when they failed to get a good price for Civil Bank and Commerz and Trust Bank. At the time, they were told that the issue would be looked into. But we have no idea what is happening at present. But I think there has to be a proper study before introducing a lock-in period. In order to ensure some balance in the market, all aspects must be studied. Personally, I think lock in period is necessary. But again, it does not have to be done in a rush. A proper study of what happens if they sell their shares or hold on to it for a while is necessary.