5 Lessons in NEPSE from a Stock Market News Writer

Opinion article by Samin Gurung

"The market can hit a positive circuit breaker today, prepare to make news about that," my boss told me in a tone that sounded unfazed and absolutely certain.

I started preparing the template, leaving space to fill in the exact NEPSE index figures, completely baffled about the prediction genius of my boss.

If you're wondering about that day, the index did hit the circuit breaker in the first hour, and Sharesansar became the first to cover news about that, thanks to the template.

This article is about the most important lessons I learned about NEPSE and investing during a span of countless such eventful days, working as a news writer who witnessed things from close.

From hydropower stocks surging like there's no tomorrow, investors complaining about brokers not receiving their calls, to fraudulent activity in Sarbottam Cement, and SEBON releasing a no-brainer red list of 51 companies.

But before you dismiss this article because a writer is trying to school you about investing, the thing that you know best, hear this out:

For two years working as a media officer at Sharesansar, I scoured the websites of NEPSE, SEBON, and Nepal Rastra Bank every single day. I talked to spokespersons from all these entities on the phone and personally. I wrote the daily market summary, and still know the exact details of some very eventful days, like they are engraved on the palm of my hands.

I saw the bullish flame ignite, roar, and much to my disbelief, wither away like it was never there. 

This article isn't about an investment strategy, for I am but an insignificant dabbler in this market. Rather, this article is me trying to uncover the curtains. Telling you what I saw from the front-row seat during my illustrious journey as a stock market news writer. 

If this article won't teach you anything more about the market, it will at least be an entertaining read, I promise.

Lesson 1: The market listens to absolutely nobody

Or as Warren Buffett said it: "This imaginary person out there - Mr. Market - he's kind of a drunken psycho. Some days he gets very enthused, some days he gets very depressed."

While working as a NEPSE news writer, I once talked to a very confident fundamental analyst who said the index's 1,400 level was way overbought. 

"This is just an overreaction to Covid-19 pandemic fears, and we as a nation don't have much to show for the surge," he'd said. 

Perhaps he was right, but the index then went on to create an all-time high at 3,198.60. 

This incident taught me: The stock market is driven by greed and fear, as much as by company fundamentals and macroeconomics. 

The stock exchange, regulators, companies, and investors come together to create a market, but then the market gets a life of its own. This Frankenstein-like nature of NEPSE (and stocks worldwide) has taught me the biggest lesson in my own investment journey - do not EXPECT from the market, prepare to RESPOND to it.

However, I don't mean to dismiss any investment school of thought. Perhaps the more experienced investors will agree that as much as you can research and prepare, there's always a variable of uncertainty. These veterans, in fact, have learned to accept and play with uncertainty. 

Lesson 2: Everybody and their dog talks about investing at the peak of a bull cycle

The bull market may have been sparked by rational investors, the country's macroeconomics, and liquidity figures. But it was fueled by thousands of naive investors who had no idea where they put their money into. 

How do I know this?

We had people openly commenting BOID numbers and personal details on articles we wrote, hoping to find out why their stock wasn't in their Demat accounts yet. Sharesansar got countless phone calls from very angry investors who thought they were scolding their stockbrokers, when in fact we were a news portal. 

Knowing that I work at Sharesansar, people even started asking me for stock tips. I gave some, without fully understanding what I'd gotten myself into. The sad part is that novice investors took stock tips from many other novice investors like me, and everything was swallowed whole like it was some magic potion. 

Midway into this frenzy, the Clubhouse app was being popular, and investors didn't hesitate to make an account. We saw heated debates between contrasting schools of thought, many of which still ring in my funny ear.

Things got too big, too soon. Stock market experts emerged out of thin air. Nobody questioned their credibility or track record. Some sold courses, and many sold dreams that never materialized.

Lesson 3: Regulators growl near the peak of a bullish surge; investor communities protest near the bottom of a bearish phase

That is a subtle way to anticipate the reversal of market momentum. 

There's something about bull markets and regulators. They don't seem to sit well together. This is the case with the SEC of the United States, and it was the same with the Securities Board of Nepal. 

Just when investors were living their wildest dreams, with stocks shooting up, SEBON came up with a list of 51 companies that it thought demanded more attention before investing. It was a subtle, politically-shrewd way of red-listing these companies. The central bank also came up with obscure policies like the limit on margin lending. 

I'm an independent entity now, so I'm free to give my opinion on this - why did the regulator find it fit to disturb the normal demand-supply dynamics of the market? Does the regulator reserve the right to judge which companies of the exchange are fit to invest, and which are not?

There was countless such interference at the peak of the trend, some also from a prominent politician who said the stock market is a useless entity for the nation. 

On the other hand, my managers also told me about how investor communities protest and hold gatherings at the bottom of a bear cycle. These groups, who once only saw green in the bull market, come together after sustaining the torturous punishment of the long, dry bear market. 

Here's my take on all this: the stock market should be a free entity. The regulator should stop changing important laws and policies when the market is gaining momentum in any direction. On the other side, investor communities should accept the fact that investing comes with risks. You can't protest your way to a bull market. The stock market is capitalism at its extreme, and the fittest survive. I think it should remain that way. 

Lesson 4: Most investors you see change sides faster than chameleons change their colors

As a voracious reader who's also passionate about investing, I have read countless books on the field. I have had my hands on books written by the very best technical analysts and expert value investors.

Apart from the classical investment philosophies, I have read the books of quants, and algorithm traders who often don't know what strategy their computer models are using. 

My point is: every strategy is valid. They all have strong arguments supported by years of data and backtesting. 

But this lesson is for the cohort of investors who flip between strategies too soon. One day, they are drawing trendlines and MACD crossovers, while you will see them with multiple pages of earnings spreadsheet the next day. The same people who asked about day trading in the bull trend claim to be long-term investors now, accumulating in the bearish phase.

If there's one thing I have learned from the most elite investors and traders in NEPSE, it is this: investing is a game of probability, and every strategy needs a large enough sample of events to prove its merit. Have patience, and let probability play its game.

Lesson 5: The show must go on, and it does

The stock market blooms on the grave of decapitated investors.

Bull and bear cycles keep happening. You'd assume people will learn from the past, but they never do. The next bull cycle welcomes equally new, equally naive investors from all walks of life. Just their names will have changed. 

Peter Lynch said it perfectly: "In stud poker and on Wall Street, miracles happen just often enough to keep the losers losing."

This is also why they say history rhymes itself. All investment philosophies are based on the very fact that people over-account for the most recent incident and completely ignore the distant past. After a bull market, people will keep expecting stocks to hit positive circuit breakers. After a bearish trend, they will hesitate to invest, perhaps because of the punch in the gut that the last bear trend gave them. 

But the show goes on, and every new momentum takes money from the uninformed to the informed. 

Stock markets always gain in the long run. 

It is just that some survive to tell the story, and some don't.

A former media officer at sharesansar, Samin now provides freelance content writing and SEO services and practices KickBoxing Muay Thai. When he is not strumming his guitar, you'll find him writing about financial freedom on nepalearn.com. He can be approached at samingurung999@gmail.com.