What If You Entered NEPSE 10 Years Ago With Rs. 1 Lakh
Mon, Feb 21, 2022 10:34 AM on Stock Market, Recommended, Exclusive,
There are various vehicles of investment. You can invest in land, gold, silver, stocks, fixed deposits, or simply deposit your money in a saving account. Today, with advancements in technology and the introduction of globalization, you can invest in different sophisticated financial assets which don't even exist a decade ago. To take the name of a few, you can today invest in NFT, digital currency (At least outside Nepal, Investing in virtual currency is still illegal in Nepal).
Investment in different financial assets would have given you different returns and you would have faced different risks associated with it. For instance, if we ignore the investment risks we know that the stock market yields the highest return among all.
Having said that, the only stock market in the country: NEPSE whose index was around 312 in February 2012, now has reached 2754.29 (nearly 9 times). The market capitalization alone grew up from 2.901 Kharba to 38.92 Kharba in this last decade.
During this period, the market has experienced numerous highs and lows. The market has witnessed investors being greedy at some times and fearing the other times. It is completely impossible and will be subjected to daydreaming if an investor thinks she can enter the market in lows and can always exist the market in highs.
So, we are talking here about the possibilities. We are exploring the results of ultimate long-term investment and analyzing the power of compounding in our wealth.
Benjamin Graham, widely known as 'the father of value investment' said many years ago: “The true investor will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies.”
Therefore, what if we have ignored short-term momentum and fluctuation in the capital market for the last 10 years?
More precisely, what gain would you have made if you have invested Rs. 100,000 in these companies of NEPSE 10 years ago?
We have short-listed 20 companies representing different sectors. These companies are being traded in the stock market for more than 10 years now.
|
S.N. |
Company |
Symbol |
Sector |
|---|---|---|---|
|
1 |
Agricultural Development Bank Limited |
ADBL |
Commercial Bank |
|
2 |
Nepal Bangladesh Bank Limited |
NBB |
Commercial Bank |
|
3 |
Nabil Bank Limited |
NABIL |
Commercial Bank |
|
4 |
Muktinath Bikas Bank Limited |
MNBBL |
Development Bank |
|
5 |
Miteri Development Bank Limited |
MDB |
Development Bank |
|
6 |
Garima Bikas Bank Limited |
GBBL |
Development Bank |
|
7 |
Manjushree Finance Limited |
MFIL |
Finance |
|
8 |
Deprosc Laghubitta Bittiya Sanstha Limited |
DDBL |
Microfinance |
|
9 |
Nirdhan Utthan Laghubitta Bittiya Sanstha Limited |
NUBL |
Microfinance |
|
10 |
Chhimek Laghubitta Bittiya Sanstha Limited |
CBBL |
Microfinance |
|
11 |
Surya Life Insurance Company Limited |
SLICL |
Life Insurance |
|
12 |
Siddhartha Insurance Limited |
SIL |
Non-life Insurance |
|
13 |
Oriental Hotel Limited |
OHL |
Hotel & Tourism |
|
14 |
Citizen Investment Trust |
CIT |
Investment |
|
15 |
Himalayan Distillery Limited |
HDL |
Manufacturing and Products |
|
16 |
Salt Trading Corporation Limited |
STC |
Trading |
|
17 |
Arun Valley Hydropower Development Company Limited |
AHPC |
Hydropower |
|
18 |
National Hydro Power Company Limited |
NHPC |
Hydropower |
|
19 |
Chilime Hydropower Company Limited |
CHCL |
Hydropower |
|
20 |
Nepal Doorsanchar Company Limited |
NTC |
Others |
But, in a few sectors, there are no better-performing companies that are being traded for 10 years or more. So, we have selected companies with the longest years being traded in the market and have adjusted the Holding period(HP) to 10 years. In doing so, the CAGR of these companies will be adjusted and thus can be compared to other companies.
Further, we have made a few assumptions. The cash dividend received from 14th of February, 2012 to 14th of February, 2022 will not be reinvested and the investment for the right shares is also adjusted in our total value.
|
Scrip |
Initial Investment (Rs) |
Closing Price @Feb 14, 2012 (Falgun 2, 2068) |
Kitta that can be brought @initial investment |
Closing Price @ Feb 14, 2022 (Falgun 2, 2078) |
Kitta as of today (after right and bonus shares) |
Total cash dividend received in 10 years (Rs) |
Amount invested for right share in 10 years (Rs) |
Today's value (After adjusting for all cash dividends & right share amount) (Rs) |
|
|---|---|---|---|---|---|---|---|---|---|
|
STC |
100,000 |
202 |
495 |
6,300 |
2,877 |
106,887 |
- |
18,232,445 |
|
|
HDL |
100,000 |
99 |
1,010 |
4,339 |
3,977 |
348,404 |
- |
17,605,790 |
|
|
CIT |
100,000 |
596 |
168 |
3,210 |
3,429 |
37,742 |
142,529 |
10,902,104 |
|
|
SIL |
100,000 |
102 |
980 |
981 |
10,980 |
49,254 |
421,088 |
10,399,527 |
|
|
DDBL |
100,000 |
230 |
435 |
1,203 |
6,530 |
194,695 |
142,630 |
7,907,693 |
|
|
MNBBL |
100,000 |
159 |
629 |
525 |
15,399 |
112,045 |
471,175 |
7,725,310 |
|
|
CBBL |
100,000 |
314 |
318 |
1,270 |
5,865 |
249,441 |
35,800 |
7,662,254 |
|
|
NUBL |
100,000 |
184 |
543 |
1,195 |
6,199 |
199,497 |
- |
7,607,567 |
|
|
GBBL |
100,000 |
116 |
862 |
570 |
10,452 |
59,777 |
366,186 |
5,651,451 |
|
|
MDB |
100,000 |
101 |
990 |
500 |
10,733 |
48,824 |
115,842 |
5,301,521 |
|
|
SLICL |
100,000 |
110 |
909 |
753 |
6,440 |
35,501 |
350,972 |
4,530,679 |
|
|
MFIL |
100,000 |
150 |
667 |
669 |
4,423 |
79,177 |
164,248 |
2,873,845 |
|
|
NBB |
100,000 |
111 |
901 |
346 |
4,520 |
121,903 |
143,892 |
1,781,539 |
|
|
ADBL |
100,000 |
109 |
917 |
404 |
3,781 |
145,224 |
56,445 |
1,616,278 |
|
|
OHL |
100,000 |
83 |
1,205 |
492 |
2,719 |
75,338 |
- |
1,413,200 |
|
|
NABIL |
100,000 |
860 |
116 |
1,064 |
1,029 |
55,812 |
- |
1,150,448 |
|
|
AHPC |
100,000 |
296 |
338 |
541 |
2,205 |
14,742 |
111,491 |
1,096,047 |
|
|
NHPC |
100,000 |
50 |
2,000 |
432 |
2,371 |
1,950 |
- |
1,025,295 |
|
|
NTC |
100,000 |
435 |
230 |
1,585 |
230 |
110,805 |
- |
475,172 |
|
|
CHCL |
100,000 |
589 |
170 |
500 |
853 |
41,027 |
- |
467,057 |
Also, we have completed ignored all sorts of capital gain tax during the last 10 years which wouldn't have mattered much due to the extended duration of investment (There were different rates of Capital gain tax in the last 10 years, 7.5% and 5%). The trading of NBB is currently halted so we have taken its price from the last trading day on the 13th of January, 2022.
Among these 20 companies, most of them are still considered to be excellent investments. In three commercial banks, NBB has the most CAGR of 33.34 %. Likewise, ADBL and NABIL have compounding annual growth rates of 32.04 % and 27.64% simultaneously. Surprisingly, two of the best-performing companies here: NBB and NABIL are under the acquisition process( NABIL is acquiring NBB).
If you have invested Rs 1 Lakh in MNBBL, you would have made about 77 Lakhs, which is the most among development banks.
MFIL from Finance sector has a CAGR of 39.91 %. And in most buzzing sectors i.e. Microfinance sector, DDBL has the highest CAGR of 54.91% which means 1 lakhs invested will now be worth more than 79 Lakhs.
Likewise, hydropower company: AHPC has a CAGR of 27.02 %. Non-Life insurance company: SIL has a CAGR of 59.03%.
Among these 20 companies, the ultimate winner is STC, a prestigious manufacturing company. STC has a CAGR of a whopping 68.3 %, meaning if you have invested 1 Lakh in STC, today your worth will be Rs.1.83 Crores.
|
Scrip |
Beginning Value (Rs.) |
Today's Value (Rs.) |
CAGR (%) |
|---|---|---|---|
|
STC |
100,000 |
18,232,445 |
68.3 |
|
HDL |
100,000 |
17,605,790 |
67.71 |
|
CIT |
100,000 |
10,902,104 |
59.8 |
|
SIL |
100,000 |
10,399,527 |
59.03 |
|
DDBL |
100,000 |
7,907,693 |
54.91 |
|
MNBBL |
100,000 |
7,725,310 |
54.38 |
|
CBBL |
100,000 |
7,662,254 |
54.29 |
|
NUBL |
100,000 |
7,607,567 |
54.21 |
|
GBBL |
100,000 |
5,651,451 |
49.63 |
|
MDB |
100,000 |
5,301,521 |
48.68 |
|
SLICL |
100,000 |
4,530,679 |
46.36 |
|
MFIL |
100,000 |
2,873,845 |
39.91 |
|
NBB |
100,000 |
1,781,539 |
33.34 |
|
ADBL |
100,000 |
1,616,278 |
32.04 |
|
OHL |
100,000 |
1,413,200 |
30.32 |
|
NABIL |
100,000 |
1,150,448 |
27.64 |
|
AHPC |
100,000 |
1,096,047 |
27.02 |
|
NHPC |
100,000 |
1,025,295 |
26.19 |
|
NTC |
100,000 |
475,172 |
16.85 |
|
CHCL |
100,000 |
467,057 |
16.64 |
|
Total/Average |
2,000,000 |
115,425,224 |
50.01 |
Altogether, if you have managed to invest 20 lakhs in these 20 companies before 10 years, you will be worth more than 11.54 Crores which is 58 times your initial investment.
This article is not written to make you feel pathetic or regretful for things you haven't done 10 years ago. Through this article, we have just endeavored to give you a perspective of long-term investment and the significance of the compounding effect.
Here are the few things, you can take away from this article:
1. You don't need a huge investment to make money from the market. If you choose the right stock and stick to it for the long term, you will obviously make a huge profit even with minimal investment.
2. The power of compounding is tremendous. When you buy a stock, it will pay you in cash or shares, If you hold those shares, you will get more shares in the future and the process continues. So, compounding helps you to grow your wealth exponentially.
3. There will be less emotion involved so there will be a minuscule risk of you losing money. When you don't frequently participate in the market you will focus on the fundamental and core values of companies. Therefore, you will be away from the unnecessary noise of the market which is so stress-free.
4. It is really easy for anyone to do this. You just need to study and carry out little research while choosing stock with good fundamentals which has the potential of giving you bonus shares and dividends. You do not need to know every happening in the market and do not necessarily need to worry about every correction or hype of the market.
