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If You Had Invested $1,000 in Nepali Share Market 5 Years Ago, This Is What You Would Have Today

Updated on December 30, 2018
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Roberto is a research analyst for a stock brokerage company in Nepal. He has been writing about the Nepali stock market since 2013.

Ever wanted to know whether your investment in Nepali stock market would have been fruitful or not? What would your investment amount of a mere Rs.1 Lakh (NRs One Hundred Thousand ~ around $1,000) five years ago be worth in today’s value?

Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.

— Warren Buffett

What Warren Buffet was trying to convey through his above quote revolves around where and how an investor chooses to invest his hard-earned money. In the world of stock investing, we don’t need to be right all the time. We just need to be consistent with our plan and become patient with what we have executed. Even if there are losses in some of the stocks, the profits in others will surely offset those losses—which is exactly what this article will show in the context of Nepali stock market. This article will show what happens if we keep the stocks for just 5 years.

For this study, I chose top 20 companies that have been listed in Nepal Stock Exchange (NP: NEPSE). These 20 stocks have always been eye-candies in their respective sectors. I have also included some other stocks that have largest assets.

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The 20 Companies Chosen

(click column header to sort results)
Company  
Ticker Symbol  
Sector  
Initial Investment (NRs.)  
Per Share Cost (NRs.)  
Shares Bought in July 2013  
Nepal Investment Bank
NIB
Commercial Bank
100,000
784
128
Nabil Bank
NABIL
Commercial Bank
100,000
1,790
56
Everest Bank
EBL
Commercial Bank
100,000
1,575
63
NIC Asia Bank
NICA
Commercial Bank
100,000
504
198
Global IME Bank
GBIME
Commercial Bank
100,000
475
211
Nepal Telecom
NTC
Telecommunication
100,000
570
175
Muktinath Bikas Bank
MNBBL
National Level Development Bank
100,000
265
377
Gandaki Bikas Bank
GDBL
National Level Development Bank
100,000
108
926
Chilime Hydropower Company
CHCL
Hydropower Company
100,000
1,193
84
ICFC Finance
ICFC
Finance Company
100,000
118
847
Soaltee Hotel
SHL
Luxury Hotel
100,000
276
362
Chhimek Microfinance Company
CBBL
Microfinance Company
100,000
556
180
Sana Kisan Microfinance
SKBBL
Microfinance Company
100,000
605
165
Oriential Hotels
OHL
Luxury Hotel
100,000
136
735
Nepal Life Insurance Company
NLIC
Life Insurance Company
100,000
1,425
70
Life Insurance Corporation
LICN
Life Insurance Company
100,000
1,301
77
Butwal Power Company
BPCL
Hydropower Company
100,000
785
127
Shikhar Insurance Company
SICL
General Insurance Company
100,000
406
246
Premier Insurance Company
PIC
General Insurance Company
100,000
126
794
First Microfinance Company
FMDBL
Microfinance Company
100,000
176
568

Method

First of all, I assumed that the initial investment exactly 5 years ago (July 2013) was NRs. 1 Lakh (NRs 100,000) in each of these stocks. I calculated how many shares of the company I could buy at their prices at that time. Then, I calculated all the stock dividends (bonus shares), cash dividends and right shares those companies may have provided in this period. All the values were compounded and the final worth was calculated. I also deducted the further investment in right shares from today’s value. The result? You will be surprised!

Few of these companies had also floated their initial public issues (IPOs) around similar time frames, which is why it was also easier to grab shares at almost their par value price.

Result of letting your investment grow for 5 years

The clear winner was a general insurance company – Premier Insurance Company (Nepal) Ltd. If I had invested just NRs. One Hundred Thousand ($ 1,000) in Premier Insurance (NEPSE: PIC) back in July 2013, my investment would have grown to NRs. 3.72 million today (around $372,000)! That’s an annual compounded return of 106%, which means that my money would have grown by 106% every year in between July 2013 and July 2018.

The second position was bagged by a national level microfinance company called First Microfinance. It is a licensed financial institution that is regulated by the central bank of Nepal, and works in remote as well as urban areas of Nepal in uplifting financial condition of people from local levels. First Microfinance (NEPSE: FMDBL) has also shown tremendous growth in its business in these years, and has been licensed by the regulator to also provide loans to smaller microfinance institutions. An investment of NRs 1 Lakh five years ago in FMDBL stock would have netted NRs 18.31 Lakh (NRs 1.83 million) today. Your return in FMDBL stock would have grown by almost 79% annually.

Another general insurance company, Shikhar Insurance, also came very close. Investment in Shikhar Insurance Company would have provided 66% annual return.

Compounded Annual Growth Rate of Investment

(click column header to sort results)
Stock  
Shares Bought in July 2013  
Stock Dividend (Bonus Shares)  
Right Offering Shares  
Total Shares Today  
Cash Dividend (NRs.)  
Today's Value (NRs.)  
Annual Return (%)  
NIB
128
168
-
296
17,025
205,000
15.44
NABIL
56
128
-
184
9,626
173,040
11.59
EBL
63
185
58
306
7,591
199,555
14.82
NICA
198
337
154
689
8,130
205,282
15.47
GBIME
211
250
-
461
4,893
130,724
5.50
NTC
175
-
-
175
41,500
166,108
10.68
MNBBL
377
1,587
1,491
3,455
7,630
1,142,846
62.78
GDBL
926
1,432
1,364
3,722
14,797
581,503
42.20
CHCL
84
106
-
190
6,935
144,642
7.66
ICFC
847
809
507
2,163
32,179
350,350
28.50
SHL
362
760
-
1,122
3,233
256,675
20.75
CBBL
180
798
162
1,140
41,577
997,484
58.41
SKBBL
165
296
95
556
5,980
641,000
45.00
OHL
735
639
-
1,374
12,699
723,030
48.54
NLIC
70
353
-
423
403
432,000
34.00
LICN
77
125
-
202
478
306,765
25.13
BPCL
127
15
85
227
18,586
104,525
0.89
SICL
246
992
124
1,362
4,585
1,263,357
66.08
PIC
794
1,738
912
3,444
4,408
3,728,704
106.21
FMDBL
568
704
2,615
3,887
20,146
1,831,138
78.87
Investment of Rs 1 lakh in Premier Insurance would have provided annual return of 106% while Investment of Rs 1 lakh in Butwal Power Company would have netted only 0.89% annual return. Average return of NEPSE is 15%

Top 5 Commercial Banks of Nepal were not even close

All five commercial banks of Nepal taken for this study were nowhere to be found in the top-half. Nabil Bank, Nepal Investment Bank, NIC Asia Bank, Everest Bank and Global IME Bank are top 5 largest private banks in terms of their assets size, yet the returns on their stock investments were not at par.

This should also show that one should not fear from being separated from the crowd. Banks make up most of the market capitalization of Nepali share market and they are safe for long term investment. However, what's safe and comfortable does not provide more return than something that is growing. Invest in sectors you believe is undervalued and which may rise in the future.

Initial Investment & Returns on a Bar Diagram

Conclusion

The study clearly shows that those companies with tremendous growth potential are much more attractive and will provide better returns. This study should also be a motivation for beginner investors to enter in Nepali stock market. Share Market environment in Nepal is undergoing a bearish trend for the past 2 years, but this is when majority of the players will win – buying in low and selling at high when the market has picked up bullish momentum. Don’t wait for the bulls to arrive, and start investing in companies that have growth potentials.

What are your investment goals? Are you now getting started in stocks?

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