If You Had Invested $1,000 in the Nepali Share Market for 5 Years, This Is What You Would Have Made - ToughNickel - Money
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If You Had Invested $1,000 in the Nepali Share Market for 5 Years, This Is What You Would Have Made

Roberto worked as a research analyst for a stock brokerage company and 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?

if-you-had-invested-rs-1-lakh-in-any-one-of-these-top-20-nepali-companies-heres-what-you-would-have-today

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.

The 20 Companies Chosen

CompanyTicker SymbolSectorInitial 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 and Assumptions

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 (IPO) around similar time frames, which is why it was also easier to grab shares at almost their par value price.

Few assumptions were also made:

  1. It has been assumed that the received cash dividends were not further invested.
  2. 5% capital gains tax on both cash and stock dividends are not assumed. Since they are only on the par value, the final result is not offset by a big amount.
  3. The shareholder subscribed to all the offered right shares issued during the 5-year period.
  4. Cost of the right share applied has been deducted from the final value.
Method

Initial No. of Shares = $1,000 (or NRs One Hundred Thousand) divided by Closing Price on the Last Trading Day in July 2013

Add: No. of bonus shares (or stock dividend of all years)

Add: No. of Right Shares of all years

Multiply Last Trading Price of July 2018

Minus: Investment in Right Shares

Add: Cash Dividend of all 5 years

= Final Value of all the shares in 2018

Result of Letting Your Investment Grow Over 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 $37,200)! 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 Nepal Rastra Bank (the central bank of Nepal), and works in remote as well as urban areas of Nepal in uplifting financial condition of people by providing access to micro loans. 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 non-life insurance company, Shikhar Insurance (SICL), also came very close. Investment in Shikhar Insurance Company would have provided 66% annual return.

Compounded Annual Growth Rate of Investment

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%

StockShares Bought in July 2013Stock Dividend (Bonus Shares)Right Offering SharesTotal Shares TodayCash 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

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 the 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 stock 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.

RELATED: 18 Mutual Funds You Can Buy in Nepal

Initial Investment & Returns on a Bar Diagram

if-you-had-invested-rs-1-lakh-in-any-one-of-these-top-20-nepali-companies-heres-what-you-would-have-today

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.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2018 Roberto Eldrum