Following the Covid-19 limit, transaction value has increased and reached 1.1 million per month in recent months. This reflects the unprecedented influx of trading investors, who, with the click of a mouse, invest money that would otherwise be idle, earning interest on a savings account.
This increased participation and diversification of the investor base is also reflected in the stock market entry data. DEMAT accounts increased from 800,000 in mid-July 2017 to 1.4 million in mid-July 2019 and are currently estimated at 2.5 million - about 8% of Nepali's population.
More than 1.5 million Nepalis have applied for the company's latest IPO infrastructure finance IPO. Compare this number with India, where about 2% of the world's people invest in the stock market, while in China the figure is estimated at 7%.
However, online trading also presents several new challenges. Asymmetrical details, bad advisory services, and rumored stock buying are major concerns. Investors can lose money in the stock market if they overpay in stock or if their investment limit is not high enough.
However, by not investing and ‘losing’ the potential profit. Therefore, investors need to understand and be aware of psychological discrimination that reduces investment success. It is about human psychology as much as it is about money and economics.
The importance of corporate segregation, long-term investment, and personal finance management are very important these days, but this is very rare in Nepal. The main motto of investors should always be: buy a set of different companies, invest regularly, keep track of the company's finances and hold on for a long time.
Significant changes now await the Nepalese stock market, which could include
Increased corporate participation in manufacturing, agriculture, etc.
Strong regulation in internal trade
Better trading solutions
Extending the limit of 50 vendors
Establishment of index funds and exchange funds (ETFs)
The NEPSE index exceeded 100% last year. You could argue that its current level is slightly higher, but just because it has increased by 100% does not mean it is overdone, and vice versa.
NEPSE's combined annual growth rate between 2001 and 2021 is about 12%, which is in line with the 10% return of the S&P 500 (which follows 500 major US companies) at the same time. Over the past 20 years, there have been instances when NEPSE decreased by approximately 75% (between August 2008 and June 2011) by more than 500% (between June 2011 to July 2016).
Stock markets are naturally round. Adjustments, and subsequent heights, will occur. In this seemingly endless period of turmoil, there is one thing to keep in mind: the fundamental change and the dynamics of a new type of online trading platform. This will be a temporary disruption but is likely to stabilize the Nepali financial market in the coming years.
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