“Portfolio Investment Analysis of
Nepal Stock Market”
Submitted By:
Sajina Basnet
Nims College
Kanibahal, Lalitpur
T.U. Regd. No: - 7-2-170-45-2010
A Proposal Submitted to
Faculty of Management
Nims College
In partial fulfillment of the requirements of the
Master’s Degree in Business Studies (M.B.S.)
Kanibahal, Lalitpur
April 2018
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Table of Contents
Page No
1 Background of the study 3
2 Statement of the problems 4
3 Objectives of the study 5
4 Significance of the study 5
5 Limitation of the study 5
6 Review of the literature 6
7 Research Methodology 6
8 Organization of the study 7-10
BIBLIOGRAPHY 11
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INTRODUCTION
1. Background of the study
Financial management is a basic element that underlies for successful operation of every
industry and organization. Management of money directs, determines and enhances the health
and productivity of total financial sector hence reciprocating its performance directly to the
growth of economy. So financial development of country largely depends upon effective
mobilization of its resources and investment upon good return. But it is often unreasonable to
predict and realize the normal return on business investment due to the competitive market
and other environmental constraints which may serve sometime as opportunity and other
times threat. Changing nature of competition and increasing pressure of globalization on
today's business world, investment management has become the most critical determinant of
the economy. The most important fact of international business operation is continuous
change in economic, political and social dimensions. These changes are beyond the control
of international business concern. In recent years international investors are attracted towards
the financial markets of developing countries. As a result many joint ventures and
multinational companies are being established in the country.
This study occupies an important role in the development of stock market. In the market,
stock index can be affected by interest rate, inflation and strengths of the rupees. The risk of a
stock can be measured by its price volatility and its beta, business sector is the most dynamic
part of economy, which collects unused funds and mobilizes it in needed sectors. It is the
heart Nepalese economy. In Nepal, stock market is not doing well because lack of awareness
towards stock market and lack of knowledge financial investment among the Nepalese people
and inefficient financial policy of government. Nowadays, the business activities are growing
in the country due to improved and stable political scenario.
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2. Statement of the Problem
Portfolio management is relatively new concept in Nepalese context. Many companies still
have no awareness towards it. The study has examined the investor's awareness about the
portfolio management of the financial institutions while investing. In this study investors
refer to the institutional or individual investors.
Investors can be classified into three categories on the basis of risk and return. First types of
investors are risk lover investors who become ready to face high risk in the hope of high
return. The second types of investors are risk avoider investors who try to avoid facing high
risk and became ready to be satisfied in low return. The third types of investors come along in
between these two investors. They are ready to bear medium risk and have medium return.
These are the three types of institutional investors. The study has examined whether these
investors are aware about the portfolio management of the institutions they are investing or
not. How effectively the financial institutions are mobilizing their investment and whether
the return that investors get back is sufficient or not in compare to the risk they are bearing. It
is not necessary that the investors who bear high risk have high return. The investors may
bear high risk and have relatively low return or vice versa. The portfolio return is the straight
weighted average of returns from the individual assets. But the portfolio risk is affected by
the variance of returns as well as the covariance between the returns of individual assets
included in the portfolio and their representative weight.
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3. Objectives of the study
The basic objectives of the study are as follows:
To examine the portfolio management practices in Nepalese Stock Market
To analyze portfolio attributes of Nepalese Stock Market in relation to risk and return.
To make comparative study of listed business sectors in Nepal, in terms of overpriced,
priced or equilibrium by analyzing the risk and return of the individual share.
To measure the optimum portfolio among the different Business Sector.
4. Significance of the study
The main significance of study is as follows;
To examine the portfolio management practices in Nepalese Stock Market.
To make comparative study of listed business sectors in Nepal, in terms of overpriced,
under priced or equilibrium by analyzing the risk and return of the individual share.
To measure the optimum portfolio among the different Business Sector.
This study covers the partial fulfillment of the requirement of MBS, T.U.
5. Limitation of the study
This study is to fulfill the requirement of Master Degree in Business Studies. It cannot cover
all the dimension of the subject matter and resource. The major limitations of the study are as
follows.
The problem of non-availability of required data and information regarding portfolio
management may limit the scope of the study.
The study has only analyzed index of different business sector of NEPSE.
The study has not analyzed dividend yield of each sector due to unavailability of
needed data and limited time period.
The study is mainly depending on secondary data.
Risk and return measurement is taken as the tools of the methodology.
Average return of the individual business sector is taken as expected return.
Since the Treasury bill issued by NRB is only of short term of 91 days, there is
Confusion in calculating risk free rate. So we have calculated required rate of return
Using treasury bills annualize rate and national saving bond interest rate as risk free
rate.
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6. Review of the literature
In a literature review research review research surveys, scholarly articles, book, journals and
other source like dissertations, conferences proceeding relevant to a particular issue, area of
research of theory, Providing description, summary and critical evaluation of each work. It is
an integral and a mandatory process is research work. The main objective for a full review of
research in past is to know the outcome of those investigation in area where similar concept
and methodologies has been used successfully. Literature review is also avoiding
investigation problems that have already been definitely answered. Thus literature review is
the process of locating, obtaining, reading and evaluating the research literature in the area of
the researcher's interest.
7. Research Methodology
Methodology may be defined as the description of process, or may be expanded to include a
philosophical coherent collection of theories, concepts or ideas as they related to particular
discipline or field of inquiry. The selection of the research method is crucial for what
conclusions we can make about a phenomenon. It is also important to choose a research
method which is within the limits of what the researcher can do. Time, money, feasibility and
availability to measure the phenomenon correctly are examples of issues constraining the
research .In this instance, research refers to the methods, tools and techniques used to conduct
and complete this thesis. Following technique will follow:
Research Design
Population and Sample
Nature and Types of Data
Techniques of Analysis
Tools of Analysis
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6. Organization of the study
The whole study has been classified into five chapters.
Introduction
This chapter deals with the general idea about the study consisting background of the
study, Statement of problem, Objective of the study, Limitation of the study and
organization of the study.
Review of Literature
This chapter contains the profound review of available literature related to the area of this
study. It is directed towards the review of conceptual framework and review of major related
studies. Risk and return, its relationship, determinants, measuring techniques and methods
etc. are reviewed from the various available literatures.
Research Methodology
This unit presents research methodology used in the study which includes various tools and
techniques of data. It consists of research method as library research and field research,
sources of data, population and sample, research design, methods of data analysis etc.
Data presentation and analysis
This chapter presents the analysis and presentation of data by using various methods of
statistical and financial tools. Tables, pie charts, etc. will be used accordingly. Similarly this
chapter also includes the major finding of the study so it is main part of study.
Summary, Concusion and Recommendation
This chapter deal with suggestive framework, which is evocated to
summary,conclusion and recommendations.
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Research Methodology
Research methodology refers to the various sequential steps to be adopted by a researcher
in studying a problem with certain objects in view. It describes the methods and processes
applied in an entier aspect of the study and it is a way of present ting the collected data
with meaningful analysis.
Research Design
Research design is necessary to fulfill the objectives of well-set research. Research design
may be defined as framework, plan and structure for collecting, analyzing and evaluating
data. It is a procedure and techniques, which provide ways for research viability
This research is belongs to portfolio risk and return analysis so the research is based on recent
historical data of last seven years. The end of fiscal year is taken as Ashad 31 and the data
range is from 1 Shrawan, 2061 to 31 Ashad, 2068. The research is mainly focused on risk and
return and portfolio management of the different business sector of NEPSE. It deals with the
common stocks of business sectors on the basis of available information. As the title of the
study suggests, it is more analytical and empirical but less descriptive.
Since the given time to finish the research is very limited, more part of the research is
analytical rather than descriptive.
Population and Sample
The population of the study is all the listed companies in NEPSE index. These are 192
companies listed in NEPSE until 2066/067. They consist of 17 commercial bank, 24
development bank, 17 insurance companies, 57 finance companies, 29 manufacturing
companies, 4 hotels, 8 trading companies and 7 others. This study is concentrated in business
sectors of NEPSE. All the business sectors of Nepal Stock Exchange are selected as sample
to attain the objectives.
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Nature and Sources of Data
The data required for the research is collected from the secondary sources and Most of data
used in the research are secondary data. During the study, informal opinion survey has also
been taken with the individual investors. Data related to the market index of stocks are taken
from the annual report published by NEPSE, trading report of NEPSE, the website of Nepal
Stock Exchange (i.e. [Link]) and periodicals of NRB are used as secondary
data. NEPSE periodicals, articles and previous research report etc. has also been considered.
Most of data used in the research are secondary data. Annual reports of NEPSE, trading
report of NEPSE and periodicals of NRB are used as secondary data.
Method of Analysis of Data
To achieve the objectives of research, this study has used various financial and statistical
tools that are necessary to find out results. The following tools shall analyze the data
presented in the study. The data presented in the study shall be analyzed by the following
tools.
The national economy. It is the transformation of monetary sources from savers to users.
They involve in various functions like creation of money, facilitating credit, and facilitating
foreign trade, safe keeping of the values etc. Commercial bank has its own role and
contribution in the economic development. It is a source for economic development and it
maintains economic confidence of various segments and extends credit to people. Thus, the
activities of commercial banking sector have contributed to eliminate poverty, reduce
unemployment and economic growth. It has been for long that banking sector in the lifeline
of a nation and its people. In regard of commercial Banks, they are an integral part of the
economy in all countries outside the commercial banking realm. The place of commercial
banks in financial system is more significant to play an increasingly dynamic and vital role in
the economy of the least developed countries like ours, which provides economic and
financial inter mediation in the economy.
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Modern commercials banks can be identified by different names such as business banks,
retail banks, clearing banks, Joint venture banks, Merchant banks etc. No matter what name
we give to bank, they all perform the same basic function. They provide a link between
lenders, those who have surplus money and do not wish to spend immediately with
borrowers, they who do not have surplus money but wish to borrow for investment in
productive purpose. By charging a rate of interest to borrowers slightly higher than they pay
to lenders, the banks make their profit. This is known as financial intermediation.
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Web sites
[Link]
[Link]
[Link]
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