In Last 8 Months of Bullish Ride, Would Investing in Banks Give Better Returns Than NEPSE's Gain? What Does Data Tell Us?

It has been a huge roller coaster ride for NEPSE after Covid-19. With increasing speculation as to how this was going to end, investors were first bearish then went on to be bullish in the market. There could be various speculation for this scenario; some of them being high liquidity, end of the bear cycle, new monetary policy, reported vaccines, etc. Despite many economists predicting the economic recovery to be L-shaped, the market showed a V-shaped recovery and this resulted in new highs for the only stock market of Nepal. When we look at the world's stock market, the same is the case. Despite a huge drop in the unemployment rate, a drop in production, with businesses facing cash crunch to service debt, companies declaring bankruptcy, the stock market has been booming along.

With the increasing market, all the sectors have been benefitted. Most of the hydropower companies that were trading below their book value went up in value by more than 150%. The Life Insurance sector has gained more than 190%. The banking sector which makes up most of the Nepalese stock market has grown by a little over 85% from the low during Covid-19. So, in this article, we will be focusing on the banking sector and compare its growth with NEPSE. In this article, Sharesansar took the base price of Shrawan 01, 2077 and compared it with the adjusted price of Falgun 13, 2077. This article focuses on what your investment would have yielded today adjusting the dividends, if you had invested your money on Shrawan 01, 2077. 

The total market yielded 83.12% in 7 months period. When we observe the yield of individual stocks and compare it with the NEPSE index itself, only 6 banks outperformed the market while 20 banks underperformed the market. 

Nabil Bank Limited (NABIL) yielded the most with a total of 123.62%. NABIL is followed by Prabhu Bank Limited (PRVU) which yielded 114.24% and Global IME Bank Limited (GBIME) which yielded 109.87% stood in the third position. 

Standard Chartered Bank Nepal Limited (SCB) which is considered the safest of all the banks yielded only 3% which is the lowest return from the banking industry.