Where did the institutional experts choose to invest in the month of Jestha? Do mutual funds minimize the risk of investors?

There are currently 13 mutual funds schemes run by 9 fund management companies. Mutual funds are still in the infant stage in our country. The status of mutual funds is still subtle as investors lack financial awareness on these funds. The article has evaluated the top companies in which mutual funds preferred to invest in the month of Jestha, 2075. This will be of help to investors seeking investment decisions. Mutual funds are compromised with professionals and experts thus; many investors rely upon these mutual funds so that individual investors can create their own portfolio.

Sector-wise Breakdown

As of the end of Jestha 2074, the 13 mutual funds have a total investment value of Rs 5.37 arba in equities. Investment in commercial banking industry accounts for the highest sector-wise investment at Rs 2.05 arba. Likewise, they have investment of Rs 1.45 arba in shares of insurance companies, accounting for the second-highest sector-wise value. Microfinance sector stands at the third highest investment priority for mutual funds with an investment worth Rs 81.63 crores.

Here is the pie chart representation of the sectorial investment preferred by mutual funds:

Commercial banks:

Among the commercial banks, Promoter Share of NABIL Bank (NABILP) is seen as the top priority for investment by mutual funds. It accounts an investment worth Rs 29.93 crores. Promoter shares of Nepal Investment Bank Limited (NIBPO) and Everest Bank limited (EBL) stands at the second and third position respectively. NIBPO has an investment Rs 18.13 crore. Mutual funds invested in EBL worth Rs 16.54 crores.

Here is the pie chart representation of top ten commercial banks preferred by mutual funds for investment as of Jestha, 2075:

Development Banks:

As for the development banks, Muktinath Bikas Bank Limited (MNBBL) has the highest investment preference among mutual funds. The mutual funds have invested an amount worth Rs 7.28 crores. Shine Resunga Development Bank Limited (SHINE) is seen in the second position with an investment worth Rs 2.59 crores. Finally, Garima Bikas Bank Limited (GBBL) has an investment of Rs 2.56 crores at the third position.

Here is the pie chart representation of all the top ten development banks preferred for investment for Jestha, 2075.

Microfinance companies:

Among the listed microfinance companies, Sana Kisan bikas Bank Ltd. (SKBBL), Deprosc Development Bank Ltd. (DDBL), and Chhimek Laghubitta Bikas Bank Ltd. (CBBL) were the top three investment priorities for mutual funds. Mutual funds invested Rs 15.08 crores in Sana Kisan, Rs 11.41 crores in Deprosc Development and Rs 10.58 crores in Chhimek Laghubitta Bikas Bank Limited.

The following pie chart shows what percentage of investment is made in which microfinance institutes:

Insurance companies:

Among the life and non-life insurance companies in Nepal, Nepal Life Insurance Company Limited (NLIC), National Life Insurance Company Limited (NLICL) and Life Insurance Company Limited (LICN) are the investment companies of top priorities for mutual funds. Mutual funds schemes have around Rs 22.03 crore investments in NLIC, Rs 19.71 crore investments in NLICL and Rs 15.13 crore investment in LICN.

Here is the pie chart representation of the insurance companies given high weightage by mutual funds:

Hydropower companies:

The inclination of investment in hydropower companies for mutual funds was in Chilime Hydropower Company (CHCL) with an investment of Rs 13.08 crore, Butwal Power Company Limited (BPCL) with an investment of Rs 10.58 crore and Sanima Mai Hydropower Company (SHPC) with an investment of Rs 4.14 crore.

Here is the pie chart representation for top hydropower companies invested by mutual funds as of Jestha, 2075:

Finance:

As for finance companies, the top three investments were Shrijana Finance (SFFIL), Goodwill Finance (GFCL) and ICFC Finance Limited (ICFC). Mutual funds invested an amount of Rs 61.59 lakhs in Shrijana Finance, Rs 26.19 lakhs in Goodwill Finance and Rs 15.71 lakhs in ICFC Finance Limited.

The provided information is further represented in pie chart:

Hotels:

Among the three listed hotels in NEPSE, mutual funds have given higher priority to Oriental Hotels Limited (OHL) with an investment of Rs 2.61 crores. It accounts for 48.90% of investment in the overall hotel sector.

Here is the pie chart representation of the same:

Mutual fund:

The mutual fund schemes also invest in other mutual funds. The mutual funds have preferred Citizens Mutual Funds (CMF1) as the best scheme for investment. It has an investment that accounts to Rs 1.21 crore. SANIMA Equity Oriented Scheme (SAEF) falls under the second highest investment value mutual fund. It has an investment of Rs 92 lakhs. Finally, NIC Asia Growth Fund (NICGF) has a third highest investment of Rs 66 lakhs. Investors looking for investing in mutual funds can also consider these ranking.

Here is the pie chart representation of these mutual funds as per the percentage of investment in Jestha, 2075:

Manufacturing & Production:

Mutual funds have invested Rs 1.19 crores in Unilever Nepal Limited (UNL) as of Jestha, 2075.

Others:

As for the others sector, mutual funds have invested Rs 18.60 crores in Citizen Investment Trust (CIT), Rs 18.51 crores investment in Nepal Doorsanchar Company Limited (NTC) and Rs 1.99 crore in Jalabidyut Lagani Tatha Bikas (HIDCL).

Here is the final pie chart representation:

Do mutual funds minimize the risk of investors?

The significant purpose of mutual funds is observed to be diversification of risk. Mutual funds in international market are although considered in high demand; the Nepalese investors perceive it in two different ways. While there are investors who are the advocators of mutual funds, there are also investors who do not prefer these funds. But all in all, it is of essence to understand whether the mutual funds in Nepal have been able to minimize the risk of investors or not.  In order to analyze this, comparison between NEPSE index and NAV of individual mutual fund has been made for the time period between Baisakh 31, 2075 to Jestha 31, 2075. The provided table shows the change in NEPSE index on the left side and change in prices of mutual funds on the right side. The difference of change can be compared:

Here is the bar graph representing the difference of the same:

Here, the NEPSE index has decreased by 6.79% from 31^st Baisakh, 2075 to 31^st Jestha, 2075. But, mutual fund scheme CMF1’s NAV has increased by 0.49% over the same time period. In case of other mutual funds, the NAV decreased in less proportion compared to the NEPSE index’s decrease of 6.79%. For example, GIMES1’s NAV decreased by 5.58%, LVF1’s by 4.33%, NIBSF1’s by 4.96%, SEOS’s by 1.09%, NMBSF1’s by 3.18%, LEMF’s by 4.77%, NEF’s by 4.16%, NIBLPF’s by 6.73%, SAEF’s by 0.39%, NMBHF1’s by 1.33%, SEF’s by 0.20% and NICGF’s by 0.20%.

The provided analysis shows that although NEPSE might go in the bearish trend, the NAV of most of the mutual funds have comparatively fallen less than the individual stocks. The reason behind this can be diversified portfolio of mutual funds, professional expertise of mutual funds while selecting investment, and an in depth analysis of stocks. Thus, beginner investors with low seed money can purchase the mutual funds from NEPSE if they aspire for “low risk, low return”. Similarly, the risk minimization can be seen as a proof from the mutual fund schemes existing in Nepalese secondary market.

Hence, the overall analysis draws the top companies preferred by mutual funds for investment. This article might be helpful to the aspiring investors in the secondary market. What are your views on the mutual funds? Do you think the top investment decisions made by mutual funds are backed up with rationality? Please write to us in the comment section below.

(Disclaimer:  Any kind of information that is provided in the article should not be used as a sole advice or recommendation by investors in order to design their investment portfolio. So, before taking steps for any kind of the information, the investors are required to base their judgment on their own financial analysis, appropriateness of the information and seek independent financial advice. The information of the company has been taken from the authorized sources such as website of the company, NEPSE, financial reports and press releases of the companies so, any changes not updated in these may differ in the analysis.)