Influence of Nepse in Stock Price of Nepal Stock Exchange

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Securities market is perhaps poorly understood among Nepalese investors. Yet, most of the investors should not know the price formation system in NEPSE. If it is not properly understood, it cannot attract the interest of interest of investors. As a result, it is natural for the investors to seek investment opportunities in the fields other than securities. “The Nepalese stock market is characterized by a low trading volume, absence of professional brokers, early stage of growth, limited movement of share price and limited information to investors (Pradhan, 2002: 42).” Because of this reality, in our country a large amount of funds is poured into non-productive sectors. So, development of securities market is necessary to divert the funds towards productive sectors then only economic development of our country is possible.

- Statement of Problem

Capital market and security market have vital influence in the growth and development for the economic condition of the country. Investment and saving depend upon the open and competitive market where every investor can invest.

There are various companies involved in the capital market and security market but they are not showing positive and good performance as per the investor’s expectations. Consequence of this the investor and the other financial companies are not being able to invest openly. This situation leads towards the poor market condition, debt, security etc. the risk of return of the investor seems to higher in present situation. Besides that price earning are not made available to the investors cannot identify good and bad stocks. Thus having lack of adequate knowledge and information about the certain companies, investors are unsystematically investing in stocks.

In present situation the under developed country like Nepal having serious problems of investors to invest in the capital market. Fluctuation in price rate of the shares, debenture etc. Causes the decline in investment in the competitive market.

Capital market is inefficient in pricing of shares; shares which are traded in stock exchange fluctuated every time so the investor is genuinely not able to find their savings. It attempts to explain and forecast changes in security price by studying the market data rather than information about the company or its prospects. The security market are mainly depended on investor and financial company to trade shares and other financial document, but the lack of knowledge of the investor could not achieve the proper arguments of the shares and other financial document, general investors tend to select any security randomly to form his/her optimum portfolio. As the best investment decision strategy in such market will be random selection of securities.

The present study will try to examine and focus the negative aspect of security market by hypothesis. It will also find out whether the price fluctuation is significantly correlated with past price movement. It also intends to derive ideas as to whether the stock market is efficient in pricing of shares or not, and also to find the dividend of stock price, determination of the stock price in NEPSE and the effect of earning and saving to the stock price.

- Objectives of the Study

The objective of this study is to provide proper knowledge of share price i.e. how it is traded, reason for fluctuation, the factor that influence to the determination of its price and so on. These major objectives behind the study or research are as below:

- To study and analyze the major financial indicators (DPS, EPS, BVPS) which have major influence of stock on stock price.

- To examine the level of influence of those financial indicators on the stock price.

- To evaluate the relation of stock price with major financial indicators.

- To study and evaluate whether stocks of the sampled companies are over-priced, under-priced or equilibrium price

1.4 Significance of the Study

- This study helps to those investor who are ready to invest but are not being enough confident to invest to the security market.

- The study will motivate to the various financial sector, businessman, and even administrative person to invest through the stock market in NEPSE.

- This study will be helpful to the financial analyst of any sector to collect the information of the movement the price change and portfolio of the stock market.

1.5 Limitation of the Study

This study has some limitations like other study such as Time constraints, and lack of research experience will be the primary limitation. Furthermore, other limitations are as follows;

- This research will based on primary and secondary data, through which the information will be collected from newspaper, auditors report, financial statement, data from the security board of Nepal (SEBON) and Nepal Stock Exchange, selected company’s annual reports and other related publications, which are not easy to accessible in short period and also the research covers the information of only few fiscal years data.

- The study has been limited only to the few companies of Nepal stock exchange.

3. Studies and reference are also limited due to the small share market of Nepal in the prospective of Nepalese stock market.

1.6 Rationale of the Study

The share market of Nepal is determined in assumption or say in bidding procedure. This may lead untrusted for the investors, shareholders, government and other related party. So, this study would be fruitful to all concerned parties as it will provide the insights on the influence of stock price in the stock market in Nepal. In Nepalese context, it has been graced that the major determinant of stock price is decided by the political situation of the country. The poor state of development of financial market in Nepal can be attributed to its financial system, which is basically bank dominated.

CHAPTER – II

REVIEW OF LITERATURE

Review of Literature is one of the most significant parts of the research. This chapter reviews some of the basic literature relating to the share market, risk and return on investment and other fundamental element regarding stock market. The articles and research work carried