Have mutual funds reentered the market? Are these funds switching from deposits to NEPSE?

  • -ShareSansar
Wed, Jan 2, 2019 1:09 PM on Exclusive, Financial Analysis, Mutual Fund, Stock Market,

Until few months ago, constantly increasing banks’ interest rates and continuously declining NEPSE attracted all the mutual funds towards fixed deposits.  The NAVs of most of the mutual funds have declined in the month of Mangsir as well. However, the total investment in shares of mutual funds in Mangsir has increased to Rs 6.80 arba as compared to investment of Rs 6.60 arba in Kartik.

Besides, these funds have also decreased their bank balance from Rs 3.93 arba in Kartik to Rs 3.20 arba in Mangsir. This reflects that mutual funds have shifted certain amount from their bank deposits to investment in shares.

Six out of thirteen mutual funds have increased their investment in shares in the month of Mangsir. These mutual funds are Siddhartha Equity Oriented Scheme, Siddhartha Equity Fund, Citizen Mutual Fund1, Sanima Equity Fund, NIC Asia Growth Fund and Global IME Sammunat Yojana. Seven of the mutual funds also have a decreased bank balance for Mangsir.

In Nepal, the move of institutional investors matters a lot to the individual investors. The investment decision of institutional investors can impact Nepalese secondary market to a greater extent. After mutual bunds buy huge chunk of shares from stock market, the price of these stocks are usually shoot up towards the peak.

Recently, banks have again come to a gentleman’s agreement to decrease the rates to 9.25% in fixed deposits and 6.5% to saving accounts. In past bearish market, individual investors blamed mutual funds for the decreased market as these funds decided to choose deposits over NEPSE. The individual investors blamed institutional investors for not playing a role to motivate the market instead going towards a higher interest return from banks.  In reply, mutual funds have been claiming their investment decision won’t be affected due to the emotions of individual investors but rather by the voice of their own team. After this agreement, the move of institutional investors will be an interesting observation to watch further.

Mutual funds have also segregated Rs 45.29 crores for investment in bonds, Rs 8.63 crores in investment in public issues and Rs 1.57 arba as fixed income instruments for Mangsir.