Banking News – The Nepal Stock Exchange (NEPSE) index has dropped from the 2,800-point level to below 2,600 points. Despite a stable government under the Rastriya Swatantra Party (RSP), sufficient investable funds in banks, and low bank interest rates, the market has failed to generate enthusiasm. Even as the government focuses on policy formulation and the Prime Minister and Finance Minister continue their engagements, the market has not shown positive signs. Banking Samachar interviewed Tulsi Ram Dhakal, Chairman of the Nepal Investors Forum, on these issues. Excerpts:

The stock market is currently sluggish, causing most investors to be under mental stress. In your view, is this a time to be stressed?

I never take stress when doing anything. Investors should not take stress when the market declines. When you are stressed, you cannot do what you intend to do. Therefore, stock trading should be done without stress. This is my fundamental investment mantra. People naturally think about gains and losses. They may feel happy sometimes and sad at other times. But even with long-term volatility, I do not take stress.

Since I have been consistently involved in this capital market since 2056 BS, it does not have a significant impact on me. Because of the kind of investments I have made and the portfolio I hold, I am never in a position to take stress. I am never discouraged by this. There is no guarantee that companies I invest in will always provide the same returns. Time and conditions bring fluctuations. New investors who have just entered the market may feel stressed. But investors should not take stress.

What would you like to say to investors who are stressed due to the recent volatility?

First, investing in the capital market should be done after proper study and understanding of companies. Once you invest after research, I believe such stress does not arise. The capital market does not always yield profits. In this sector, there are gains and losses. Even in fluctuating conditions, we must be able to select companies. If you invest in good stocks, even if there is no short-term capital gain, you receive dividends. Recently, many investors have entered the market. Some may have invested with understanding while others may have invested without. Those who invested without understanding are certainly suffering. Therefore, before investing in the capital market, one should think carefully and invest after study.

Whether investors entered the market with or without understanding, the market is now at 2,600 points. How should those who invested when the market was at 2,800 or 3,000 points manage their situation?

For this, investors should take loans only up to 30 to 40 percent of their portfolio. This protects investors to a great extent. In my view, all investors should take this as a fundamental mantra. Ideally, if possible, borrowing only 30 percent of the portfolio is best.

If investors get excited and invest beyond 30 to 40 percent of their portfolio, they will not feel stressed even when the market declines. When the market is moving, you can increase it from 30 to 40 percent. Otherwise, we investors do not invest when the market is falling. But we start investing when it begins to rise. We have developed the habit of investing after the market reaches a high point. This causes pain to investments. Wise investors exit the market at high points. At the very least, if the interest on bank loans is covered by bonuses and dividends, there is no need to take stress. After the companies’ general meetings, dividends start coming, and you should invest in a way that allows you to cover costs from that. The dividend should manage for one year. But if you start investing beyond your capacity and take loans of 50-60 percent of your assets, pressure builds.

So investors were misled after the RSP government came?

The market did respond to the RSP government. It responded strongly, pushing the index from 2,600 to above 2,800. But recently, the question is whether the government could not instill confidence in investors. Policies have been made. To be honest, the previous government had attacked us through monetary policy. We can never forget that in history. But that has now been revised and fully liberalized, and policies have been eased. Yet the capital market could not rise. Banks have Rs 82.44 arab in deposits. If you look at lending in that context, only Rs 59.36 arab has been invested. If we had been allowed to invest up to the CD ratio, it is only 1.42 today. That means we have approximately Rs 15 arab in investable funds. Despite this, the capital market has not been able to rise.

You are among the major investors, Chairman of the Investors Forum, and have three decades of experience. What kind of companies should investors choose during both rising and falling markets?

First, investors should look at which groups are operating the company. Also, look at the company’s growth, future plans, and the promoters’ history. If you invest in excellent companies after studying all these, you can find companies that provide returns every year. Because of this, investors do not suffer every year.

It is we who choose companies that have received approval from SEBON and are listed on the stock exchange. SEBON gave approval after they reached a certain level, and if the listing complies with NEPSE regulations, the monitoring of those companies is SEBON’s responsibility. We have the right to choose good companies among those listed. We do not have to invest in every listed company. Therefore, we can select and invest in companies within that. If that is done, there will be no regret from investing in the capital market. For example, where is the person who bought Unilever now? Where is the person who bought 10 shares of Nabil Bank back in the day? Where is the person who bought Chilime earlier? There are many such companies that show that investing in them does not lead to losses. The main thing is that you must be able to select the right stocks.

There is sufficient money in banks, a stable government, and low interest rates. Yet the stock market seems to be struggling. Why is it falling day by day? Is it that investors cannot trust?

Investors were certainly excited when the government was formed. The capital market welcomed the government. But in recent times, the market is falling because of the lack of confidence that needed to be built among investors. Banks have over Rs 15 arab in investable funds. The time for annual returns on investments is also approaching. Looking at the financial statements of almost all banks and financial institutions, all have shown slightly improved performance compared to the previous fiscal year. Their capacity to deliver returns is also visible. Yet the capital market failing to rise is something we are also surprised by. At this time, the capital market should be rising. Everything is favorable. The Chairman of SEBON has also been saying he will improve the board’s operations. The Prime Minister and Finance Minister themselves are interacting with businesses. But why confidence could not be instilled among us investors in the capital market remains a mystery.