Institutional investors, including mutual funds and investment companies, are steadily expanding their presence in Nepal’s stock market despite a prolonged decline in share trading at the Nepal Stock Exchange (NEPSE).
According to NEPSE data, mutual funds’ total investment in the share market reached Rs 68.19 billion by mid-August, up 1.77 percent from Rs 67.01 billion recorded a month earlier in mid-July.
The figures indicate that institutional investors are continuing to accumulate shares even as the broader market remains under pressure. Mutual funds increased their portfolios by Rs 1.18 billion in just one month, with both newly launched funds and existing schemes contributing to the rise.
A mutual fund pools money from multiple investors and deploys it across financial assets such as shares, bonds and other securities through professional fund managers.
Market participants say the continued expansion of institutional portfolios reflects growing confidence among large investors in the long-term prospects of the stock market. “This shows that institutional investors remain positive about the market despite the prolonged pressure on share prices,” a stockbroker said.
Among individual mutual funds, Sanima Equity Fund-2 recorded the highest percentage increase in secondary-market investment, expanding its share investment by 106.97 percent in one month. Its investment rose from Rs 54 million to Rs 104 million.
Similarly, Citizens Balanced Scheme increased its investment by 24.77 percent, taking its portfolio to more than Rs 1.15 billion.
Market analysts attribute the growing institutional interest partly to declining interest rates on bank deposits. With returns from traditional bank deposits becoming less attractive, investors have increasingly been looking toward equities for potentially higher returns.
Analysts also point to a gradual accumulation strategy among large investors. With the stock market remaining subdued for an extended period, institutional investors appear to be using the lower market levels to gradually build their portfolios.
At the same time, demand for margin-based lending has also increased among both individual and institutional investors. According to Nepal Rastra Bank data, margin loans extended by banks and financial institutions reached Rs 166 billion by the end of the last fiscal year, compared with Rs 140 billion a year earlier.
Of the total, equity-backed loans exceeding Rs 10 million stood at Rs 119 billion, highlighting the growing use of borrowed funds for stock market investment.
The contrasting trends—declining market transactions alongside rising institutional investment and margin lending—suggest that while short-term investor activity remains weak, larger investors are increasingly positioning themselves for a potential recovery in the Nepalese stock market.
