Stock Market: A Combination of Risk and Opportunity

• Prem Wali

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stock market. Especially the secondary market. In the real sense, it is considered a risky market. It is influenced by the day-to-day demand and supply of shares, the psychology of investors, the performance of the company, the economic condition of the country, policy decisions, and the developments in the global market. Therefore, in this market, sometimes the price of the stock goes up very high and sometimes it goes down unexpectedly.

Many of the world’s richest people and successful investors have made this market the basis of their prosperity. For example, people like Warren Buffett, Peter Lynch, Rakesh Jhunjhunwala of India have amassed billions of wealth through long-term investments through this secondary market.

For this reason, the stock market is often referred to as the ‘market of risk and reward’. Investors who are willing to take risks and have the right knowledge, analysis and long-term vision get a great opportunity from this market.

In the case of Nepal too, the secondary market has strengthened many investors financially. However, those who buy shares based on short-term thinking, rumor-based investments or simply following others have suffered losses.

So in order to be successful in the secondary market, you need to pay attention to

• Choosing the right company,
• Long-term investment outlook,
• Risk Management,

Regular study of the

• market is very important.

Why not increase the margin loan limit ? Relationship between banks, investors and the nation’s economy

Currently, there is a lot of liquidity in banks in Nepal. The money is frozen like ice in the bank. But banks are not able to provide additional share loans (margin loans). The main reason for this is the policy limitations of the Nepal Rastra Bank. Many banks have exceeded the limit of lending. As a result, investors are not able to take loans according to their eligibility. This has a direct impact on liquidity and transactions in the market.

The failure of the bank to maintain Risk Weightage Assistance (RWA) may also contribute to this problem. However, the government and the Nepal Rastra Bank have made it necessary to increase the limit of share loans. Only this can make the market dynamic and help the country’s economy in the long run.

Balance of cost and benefit

Currently, if an investor takes a loan of Rs 1 crore, he can invest about 98% in the stock market and use the remaining 2% for personal expenses.TAG_OPEN_li_92

• This increases the flow of money to other areas, even if it is small. Which brings dynamism to the economy.
• The number of participants in the stock market is in millions, from young to old, and this number increases when the market is positive.

Relationship between stock market and loan

At present, margin loans of about one to TAG_OPEN_li_89 one and a half billion rupees have been issued in the stock market. However, this is not the full potential of the market.

TAG_OPEN_li_88 The market has the potential to reach 5 trillion. Every week, new companies are entering the secondary market. However, limited money with people cannot increase demand. That’s why a loan is necessary.

Challenge of Bank and Rastra Bank

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• Banks have a lot of liquidity, but the Rastra Bank is finding it difficult to manage.
• If such liquidity is held in the bank for a long time, it can have a negative impact on the economy.
• The freezing of money in the bank reduces the government’s taxes and resources. This will have an impact on the country’s debt burden.

Investor’s View

Now you can buy shares of a good company by taking a loan at an interest rate of less than 8%.TAG_OPEN_li_84

Such companies have the potential to give 10-TAG_OPEN_li_83 12% returns, in just 3-4 months.

• Investors can pay interest from half of the return and use the rest for personal spending or risk management.
• In the cheap market, taking loans now is a favorable time for investors. Companies are announcing results. Therefore, it is imperative to increase access to loans.

Finally

• Expanding the scope of margin loans in Nepal should not be delayed.
• It makes the stock market dynamic.
• benefits investors.

In the

• economy, money is dynamic.
• will help in the development of industry and other sectors.

The government and the Nepal Rastra Bank should address this problem immediately. If investors do not get loans according to their qualifications, not only will the stock market slow down, but the country’s economy will also be affected.

(The writer has been active in the stock market for a long time.) )