‘Survival of the fittest’ in the Nepalese Share Market

August 13, 2019 | Investopaper

The stock market observes different market cycles at various point of time. As a result, your fortune also swings along with the changing market situation. Many stocks flourish and then vanish in the stock market along with changing trends and sentiments. Those stocks which can cope with the changing trend and sentiments of the market will survive in the stock market. On the other hand, stocks of many companies will find it difficult to fight back after going down the pit. In the long run, the company with good fundamentals can only survive in the stock market. Hence, the ‘Survival of the Fittest’ comes into the act in the stock market too. Let us analyze the performance of stocks from different sectors in Nepalese share market in this context.

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Two leading companies of the microfinance sector Nirdhan Utthan and Chhimek Laghubitta has already shown good comeback by demonstrating tremendous financial growth during a bear market. As a result, investors who purchased shares of these companies during bull are almost on a breakeven range. The break-even price of Chhimek and Nirdhan Utthan is Rs. 1068 and Rs. 905. On the other hand, Sana Kisan Laghubitta is also near its break-even price of Rs. 1144. Likewise, Deprosc Laghubitta is also nearing profit zone. This proves that companies with good fundamentals will not remain down forever. They will regain their value in the long run after stock market gains consciousness.

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If we talk about the banking sector, commercial banks have shown good growth in their net profit this year. And anticipating this growth, the price surged in the month of April. Still, most of the banks need to grow by a huge margin. To see the break-even price of commercial banks, click here. The insurance sector has been on a losing side after companies have shown stagnant growth in the third-quarter report. Since most of the companies have met the capital requirement of 1 Arab, investors are now analyzing the dividend capacity of the insurance. Big companies like Shikhar Insurance and Sagarmatha Insurance have fallen too. The break-even price of these companies is Rs. 1838 and Rs.1087 respectively. Likewise, investors of Nepal Life Insurance, Life Insurance Corporation, and National Life also need good growth to recover their cost. To see the breakeven price, click here.


Development Bank stocks have also fallen rapidly in the bear market. Almost, all the companies are trading in the 100-300 price range right now. The exception is Muktinath Bikas Bank which is trading at Rs. 368. Some of the stocks like Green Development Bank which traded for more than Rs. 600 before 400 percent right issue is now available at around IPO price. Many banks have recently gone for the merger and acquisitions to bring synergy in their financial performance. So, investors of these sectors need to be patient if they want a good return from their investment. Finance are all on the way of merger. After the acquisition by the big companies, the finance companies are in the danger of being wiped out from the industry and the stock market.

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Looking at the hydropower sector, two prime companies Chilime Hydropower and Butwal Power Company also need to grow by a huge margin to reach the break-even value. Hydrosector has become one of the unpreferred sectors by investors in recent times. IPO of hydropower goes unsubscribed nowadays. 13 low priced stocks in the current market belong to the hydro sector. Many hydro stocks are trading below Rs. 100, the IPO subscription price. The shareholders of Api and Barun Hydropower are the major sufferers of the market crash. API needs to reach Rs. 740 to attain breakeven which seems unlikely looking at the financial performance of the company. Likewise, Barun and Ridi which are trading below Rs. 100 needs tremendous price gain (more than 300 percent)  to make a market comeback.

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Nepal Telecom is one of the blue-chip stocks of the Nepalese share market. It is one of the consistent stocks in Nepse which provides steady dividend return to the shareholders. It remained unshaken by the market crash too. The investors of NTC are in the profit zone. Likewise, Citizen Investment Trust is also near its breakeven price of Rs. 2390 which shows good comeback after a serious market fall.

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So, basically, investors need to realize that good stocks will gain value in the long-run period. Investing by looking at the company rather than its price is a far better idea to excel in the stock market. The market cycle is a natural phenomenon and it is unavoidable. Hence, sensible investors need to pick those stocks which can overcome different market cycles and give you a good return in the long run.

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Value investors pick good stocks at a low price and sell overpriced stocks. So, the stock market always provides opportunities to include good stocks at a bargain price. Good stocks are your defensive stocks in the bear market while bad stocks are the leakages. So, invest by realizing that bad stocks will be selected and overthrown by good stocks in the long run. Like in our nature, it is sure that survival of the fittest comes into play in the stock market too. So, try to pick stocks that have strong fundamentals to adapt to the changing market situation.

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One thought on “‘Survival of the fittest’ in the Nepalese Share Market

  • August 17, 2019 at 3:37 am

    Excellent analysis….


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