Nepal Stock Analysis 2026: Fundamental, Technical & Portfolio Strategy for Investors

Part 5 of 5, the final part of the Nepal Share Market Academy: Zero to Expert series. This one builds on everything before it, especially Part 4 on costs and WACC.

One Year Later, Ram Has a Question

A year has passed since Ram opened his accounts. He's applied for a handful of IPOs, got lucky twice, bought a few shares in the daily market, and made a small profit on some and a small loss on others. He's no longer the nervous beginner from Part 1.

But a new problem has shown up. Every WhatsApp group he's in has a "sure shot" stock. Every week there's a new tip, a new theory, a new chart screenshot. Ram realises something uncomfortable: he still has no real way to tell a good company from a noisy one.

That's what this final post is about. We'll cover how to judge what a company is actually worth (fundamental analysis), how to read what the crowd is doing on a chart (technical analysis), and how to put it all together into a portfolio you can live with when the market has a bad month. There's more material here than in the earlier posts, so grab a cup of tea and read it in two sittings if you need to.

One honest note before we start. Nothing in this post will let you predict the market. Nobody can. What it will give you is a method, and a method beats a mood every time.

Two Ways of Looking at a Share

Fundamental analysis asks: what is this business worth? You study the company's profits, assets, debts and management, then decide whether the price is fair.

Technical analysis asks: what are buyers and sellers doing right now? You study the price chart and trading volume to read the crowd's behaviour.

A simple way to remember it: fundamentals tell you what to buy, and technicals can help you decide when. Most long-term investors lean on the first, most short-term traders lean on the second, and sensible people use a bit of both.

Part A: Fundamental Analysis

Where Do You Get the Numbers?

Listed companies publish quarterly reports and an annual report. You can find them on the company's own website, on NEPSE and on financial news and data sites. Read the latest quarter and compare it with the same quarter last year. A single quarter can mislead you, because seasons and one-off events can swing results. Trends over several quarters tell a much truer story.

The Core Numbers Every Investor Should Know

Let's use one imaginary company. Say it earned a net profit of Rs. 40 crore this year, has 4 crore shares, and a net worth of Rs. 500 crore. Its shares trade at Rs. 200.

1. EPS (Earnings Per Share). Profit divided by the number of shares.
40 crore ÷ 4 crore = Rs. 10 per share. It tells you how much profit each share earned. Be careful, because some reports show EPS only for the quarter and others show it annualised. Always check which one you're looking at.

2. P/E Ratio (Price to Earnings). Share price divided by EPS.
200 ÷ 10 = 20. Roughly, you're paying 20 years of current profit for the share. A low P/E can mean a bargain, or a business in trouble. A high P/E can mean a growth story, or just excitement. It only makes sense when compared with similar companies and with the company's own past.

3. Book Value Per Share (BVPS). Net worth divided by shares.
500 crore ÷ 4 crore = Rs. 125. This is what each share would roughly be backed by in the company's books.

4. P/BV Ratio (Price to Book Value). Share price divided by book value.
200 ÷ 125 = 1.6. If it's below 1, the market is valuing the company at less than its books. Above 1, you're paying a premium for earning power. For banks, finance companies and insurers, this ratio is widely watched.

5. ROE (Return on Equity). Profit divided by net worth, shown as a percentage.
40 ÷ 500 = 8 percent. This tells you how efficiently the company turns shareholders' money into profit. Consistently higher ROE than peers is a good sign.

6. Dividend Yield. Dividend per share divided by price.
If the company pays Rs. 5 per share on a Rs. 200 price, the yield is 2.5 percent. Remember from Part 1 that many Nepali companies pay a large part of their reward as bonus shares rather than cash, so look at both.

In plain words: EPS and ROE tell you how good the business is. P/E and P/BV tell you how much you're paying for it. You want a good business at a sensible price, and the best investors keep asking that exact question.

Sector-Specific Checks

Different businesses make money in different ways, so each sector needs its own extra checks.

Banks and finance companies: Look at NPL (non-performing loans, meaning loans people aren't repaying). A rising NPL is a warning sign. Also look at the capital adequacy ratio (how much cushion the bank holds against losses), and the growth in loans and deposits. Interest rates and Nepal Rastra Bank's policies affect this sector heavily.
Hydropower: Check whether the plant is already producing power or still under construction, how much debt it carries, the power purchase agreement, and how rainfall and river flow affect output. Construction delays and heavy debt are common troubles.
Insurance: Look at premium growth, claim levels and how well the company manages its investments.
Microfinance: Check loan recovery, how spread out its borrowers are, and how it handles rule changes.
Hotels, manufacturing and others: Look at sales trends, debt, margins and whether demand is steady.

The Things Numbers Can't Tell You

Spreadsheets miss some of the most important stuff. Ask yourself:

Who runs the company, and what's their track record?
Is profit steady, or does it jump around? Smooth growth is worth more than one great year.
Is the dividend history reliable?
How is the shareholding structured? Promoter shares and public shares are separate, and promoter shares have lock-in conditions. A large block becoming tradable can add selling pressure.
What could go wrong? Rule changes, competition, debt, a single big customer.

Part B: Technical Analysis

Technical analysis rests on one idea: price and volume record what thousands of people actually did with their money, and human behaviour repeats. It isn't magic, and it fails often, but it helps you avoid buying in a rush at the worst possible moment.

Reading a Candlestick

Most charts use candlesticks. Each candle shows one day's trading with four prices:

Open: the first trade of the day
High: the highest price reached
Low: the lowest price reached
Close: the last price of the day (the most important one)

If the close is above the open, the candle is usually green, meaning buyers won that day. If the close is below the open, it's red, meaning sellers won. A long wick (the thin line) shows the price went somewhere and got pushed back.

Trend: The First Thing to Check

Is the price generally moving up, down or sideways over weeks and months? Buying in a clear uptrend is easier than trying to catch a falling share. As the old market line goes, don't try to catch a falling knife.

Support and Resistance

Support is a price level where a falling share keeps stopping and bouncing, because buyers show up. Resistance is a level where a rising share keeps stalling, because sellers show up. Imagine a ball bouncing between a floor and a ceiling. When the price finally breaks through one of them, it often moves strongly.

Moving Averages

A moving average smooths out daily noise. A 50-day moving average is simply the average closing price of the last 50 days, recalculated every day. If the price stays above it, the trend is generally healthy. If it falls well below it, the mood has turned. The 200-day average shows the long-term picture.

Volume: The Truth Detector

Volume is the number of shares traded. A price rise on heavy volume means many people believe in the move. A price rise on very thin volume can be fake strength. A few people can push a lightly traded share around quite easily.

Technical Analysis in Nepal's Market: A Reality Check

The 10 percent daily circuit limits how far a price can move in a day, so big moves are spread across several candles.
Many shares are thinly traded, which makes chart patterns far less reliable than in large global markets.
Sentiment, news and rumours can overpower any chart, especially in a small market.

Use charts as a helper, never as a crystal ball.

Part C: Reading the Whole Market

Even a great company can fall when the entire market falls. So lift your eyes from single stocks now and then and look at the big picture.

NEPSE index and turnover: Is the index rising or falling, and is daily turnover (the total value traded) growing or shrinking?
Interest rates and bank liquidity: When money is cheap and plentiful in the banking system, more of it tends to flow into shares. When it's tight, the opposite happens.
Nepal Rastra Bank policy: Its monetary policy and rules on lending against shares can change market mood quickly.
Government budget and political events: Taxes and policy announcements move sectors.
Investor mood: When everyone, including your barber and your neighbour, starts talking about shares, it's often a sign that the party is near the end.

Nepal has lived this lesson. Roughly speaking, the index climbed above the 3,000 level in 2021 amid huge excitement, and then fell by close to half within about a year. People who'd borrowed money to buy near the top were hurt the most. People who'd spread their money, kept some cash, and bought good companies could sit through it. The market recovered over time, but only investors who were still in the game got to benefit.

Part D: Building a Portfolio You Can Sleep With

A portfolio is simply all your investments together. Picking stocks matters, but how you combine them matters just as much.

1. Diversify, But Sensibly

Spread your money across different sectors, such as banking, insurance, hydropower and others, so one bad event doesn't flatten you. But don't go silly and own 40 shares you can't follow. For most individuals, somewhere in the range of 8 to 15 well-chosen holdings is easier to track than a long messy list.

2. Decide Position Size Before You Buy

Choose in advance how much of your total portfolio any single share can take up. Many careful investors keep one company to around 10 percent or less. With a Rs. 5,00,000 portfolio, that's about Rs. 50,000 per company. This number isn't a law, it's a guard rail, and you can adjust it for your comfort.

3. Buy in Parts

Nobody can time the exact bottom. Splitting your purchase over several weeks or months, say three or four instalments, means you won't put everything in at the very top. It also stops one bad decision from ruining the whole plan.

4. Have an Exit Plan Before You Enter

Write down two things at the time of buying: the price at which you'd admit you were wrong (a stop-loss), and what would make you sell for profit. For example, buying at Rs. 500 and deciding to reassess if it falls to Rs. 450. Keep in mind that with Nepal's circuit limits and thin trading, you may not always be able to exit at the exact price, so give yourself some room.

5. Consider Mutual Funds for the Core

If you don't have time to study companies, listed mutual funds pool many investors' money and spread it across many shares under professional management. They're measured by NAV (net asset value per unit). Read the fund's objective, fees and history first, and note that fund units can trade above or below NAV in the market.

6. Keep Some Cash

Cash isn't a wasted asset. It lets you buy when others are panicking and keeps you from being forced to sell at a bad moment. Keep your emergency fund separate from all of this, as we said in earlier posts.

7. Review, Don't Obsess

Check your portfolio on a schedule, maybe monthly or after each quarterly report, not every ten minutes. When one holding grows far larger than your plan, trim it. This is called rebalancing.

A Sample Portfolio, for Illustration Only

This is not advice and not a recommendation. It simply shows how thinking in proportions looks. Suppose Ram has Rs. 5,00,000 to invest:

Part of portfolio	Share	Amount (Rs.)
Banking and financial companies (2 to 3 names)	30%	1,50,000
Hydropower and energy (2 names)	15%	75,000
Insurance (1 to 2 names)	10%	50,000
Mutual fund units	15%	75,000
Other sectors (hotel, manufacturing, etc.)	10%	50,000
Cash kept ready	20%	1,00,000

Your numbers will look different depending on your age, income, goals and how well you sleep when prices drop. That last one matters more than any spreadsheet.

Your Mind Is the Hardest Part

You can know every ratio in this post and still lose money, because markets mostly test your emotions. Watch for these old habits:

FOMO (fear of missing out): Buying a share only because it's flying and everybody's talking about it.
Herd behaviour: Doing what the crowd does because it feels safer. It rarely is.
Anchoring: Refusing to sell below the price you paid, as if the market cared what you paid.
Loss aversion: Holding losers for years because selling makes the loss feel real, while selling winners far too early.
Overconfidence: Two good trades in a row and suddenly you feel like an expert. The market has a way of humbling that feeling.

The fix isn't to become emotionless. It's to have written rules, so you aren't deciding everything in the heat of the moment. Keep a small journal: why you bought, what you expected, and what happened. Looking back at your own mistakes teaches more than any course.

Your Pre-Buy Checklist

Before you buy any share, try answering these questions honestly:

Can I explain how this company makes money in two sentences?
Has profit grown steadily over the last few years?
How do its EPS, P/E, P/BV and ROE compare with similar companies?
For banks, how's the NPL? For hydropower, how's the debt and construction status?
Does it have a reasonable dividend or bonus record?
Is the price near a recent peak, or at a more comfortable level?
How much of my portfolio will this holding be?
At what price or event will I rethink this decision?
Am I buying because of analysis, or because of a tip and excitement?
Can I afford to leave this money alone for several years?

Terms Explained: Quick Glossary

Term	Simple Meaning	Why It Matters
Fundamental analysis	Judging a company's real value from its business and numbers	Helps you decide what to buy
Technical analysis	Reading price and volume charts	Helps you think about timing
EPS	Profit per share	Shows earning power of each share
P/E ratio	Price divided by EPS	Shows how much you pay for earnings
BVPS	Net worth per share	Shows the book backing of a share
P/BV ratio	Price divided by book value	Compares price with the company's books
ROE	Profit as a percent of net worth	Measures how well money is used
Dividend yield	Dividend as a percent of price	Shows income return from a share
NPL	Share of loans not being repaid	Key health check for banks
Capital adequacy	A bank's cushion against losses	Shows financial safety of a bank
Candlestick	Chart bar showing open, high, low and close	Shows each day's tug of war
Support	Price level where falls tend to stop	Helps spot possible buying zones
Resistance	Price level where rises tend to stall	Helps spot possible selling zones
Moving average	Average of recent closing prices	Smooths noise and shows trend
Volume	Number of shares traded	Shows how strong a move really is
Turnover	Total value traded in the market	Shows market activity and mood
Stop-loss	Preset price to exit a losing trade	Limits damage from a wrong decision
Diversification	Spreading money across different holdings	Reduces the effect of one bad event
Rebalancing	Adjusting holdings back to your plan	Controls risk as prices change
NAV	Net asset value per mutual fund unit	Shows what a fund unit is backed by
FOMO	Fear of missing out	Drives many bad buying decisions

Frequently Asked Questions

Which is better, fundamental or technical analysis?
They answer different questions. Fundamentals help you pick good companies, and technicals can help with timing. Long-term investors usually rely more on fundamentals.

What is a good P/E ratio in Nepal?
There's no single magic number. Compare a company with others in its own sector and with its own history. A "cheap" P/E in a weak business isn't a bargain.

How many shares should I own?
Enough to be spread out, but few enough to follow properly. Many individual investors find roughly 8 to 15 holdings manageable.

Should I buy only when the price is low?
Low price per share doesn't mean cheap. A Rs. 150 share can be far more expensive, relative to its earnings, than a Rs. 600 share. Always look at valuation ratios, not just the price tag.

Can I make a living from trading in Nepal?
A few people do, but most don't, and the costs and taxes from Part 4 make frequent trading harder. For most people, steady long-term investing beside a regular income is a safer path.

Is it safe to borrow money to buy shares?
It magnifies both gains and losses and can force you to sell at the worst time. Beginners are generally better off using only their own spare money.

How often should I check my portfolio?
A monthly review, or after each quarterly report, is enough for most long-term investors. Checking every few minutes mostly increases stress.

Where can I keep learning?
Read company quarterly and annual reports, follow notices from NEPSE, SEBON and Nepal Rastra Bank, and keep your own investment journal. Your own records become your best textbook.

The Series, Wrapped Up

If you've read all five parts, you've covered the whole road: what a share is and who runs the market (Part 1), how to open your accounts (Part 2), how IPOs work (Part 3), how to buy, sell and calculate your real profit (Part 4), and how to analyse companies and build a portfolio (Part 5).

None of it guarantees profit, and anyone who says otherwise is selling something. What it does give you is the ability to ask better questions, avoid the most common traps, and make decisions you can explain to yourself. In a market full of noise, that's a real advantage.

Start small, stay curious, keep learning, and be patient with yourself. Ram, for what it's worth, is still investing, and he's finally stopped checking the market every ten minutes.

Disclaimer: This article is for education only and is not financial advice. The examples and sample portfolio are illustrations, not recommendations. All investments carry risk, including the loss of your capital, and rules, ratios and market conditions change, so do your own research or consult a licensed adviser before acting.

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