NEPAL STOCK MARKET UPDATE

Mutual Fund and their Short Critical Analysis

Mutual Fund that belongs to all the investors aimed to provide appreciation over the medium to long term. In the context of Nepal, the history of MF started with the floatation of NCM Mutual Fund, 2050 an open-ended fund with an amount of 100 million and managed by NIDC Capital Markets Ltd.

Currently, there are different mutual funds schemes in the market such as Siddhartha Investment Growth Scheme – I (SIGS-I) and Nabil Balanced Scheme – I (NBS-I) etc. These funds invest in stocks, bonds and money market instruments. The problem in the Nepalese contest is; investors can hardly get neutral advices regarding the funds from the sponsor banks though a lot of mutual fund schemes are currently in action.

Indian Mutual Funds have been started since 1962. Assessing the Indian MF industry, diversification, investor literacy, penetration to rural areas and smaller towns, conflict of interest, ambiguity of law, lengthy procedures and lack of customer focus on products were seen as past and prevalent problems. Although different segments of the industry were working on resolution, the problems did form the bottleneck in the rapid growth of the industry. 

In Nepal, similar problems, apart from the existing ones are expected over the next decade. Liquidity, volatility, transparency, investor literacy and system related problems will take time and immense effort to be resolved. Apart from these problems, the concentration of Nepalise stock market in banking, financial institutions and insurance company stocks make it harder for mutual funds to generate a finely diversified fund. Resolving these issues would ensure bright future of mutual fund industry in Nepal, at least for the next decade until Exchange Traded Funds (ETFs) replace them.