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NIRAJ KARMACHARYA : SIMPLIFYING INVESTMENTS

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Jaguar Investments is an investment management firm established by Niraj Karmacharya, along with a group of individuals from various business backgrounds with an aim to promote Nepal’s capital market through proper financial education as well as strategic investments. The company’s expertise lies in the financial markets such as fund management, investment research, financial advisory and venture capital financing. Their primary motif was to bring the idea of a professionally managed investments firm in Nepal in an effort to transform the capital market sector through new and innovative ideas.

Karmacharya completed his undergraduate studies in the U.S. with prime focus on financial markets. His thesis about the 2008 housing bubble and its correlation to an impending recession proved to be a stepping stone to his enrollment at Drake University for his Master’s Degree along with an opportunity to work at Wells Fargo Bank. For someone who was living the American dream, Niraj could have made his stay permanent in the U.S. However, his attachment to family, passion for investments as well as his aspirations to ‘do something in Nepal’ made him take that decisive flight back to Kathmandu.

“I believe proper financial education is key to making good investment decisions, which in turns helps promote a sound and robust financial market.” Explains Niraj.

We had the chance to meet Niraj and get into a fruitful discussion about the financial market of Nepal. Here are the excerpts.

TNM: LEAVING BEHIND A POTENTIALLY GLORIOUS FUTURE AND COMING TO NEPAL IS A BOLD DECISION, WHAT LED TO IT?


NK: To be quite honest, life in the U.S. was definitely comfortable, and hardly do you ever have to worry about basic necessities like water or electricity. No matter where you go, you have access to some of the best facilities and technology. For someone who has witnessed load-shedding since my early days, it was amusing to watch my American friends panic hysterically when we went through a power outage for about half an hour. For them,
not having access to electricity was unimaginable for they believe that
it was only possible during disaster scenarios or something equivalent.

However, I’ve always harbored an attachment for home. Having spent most of my life in a boarding school, and then continuing studies in India and the U.S., I’ve always been away from home and I sincerely wanted to do something here.

From an economics perspective, I believe the American economy is gradually becoming saturated while several Asian and African economies are witnessing spectacular growth. Sandwiched between two of the global powerhouses China and India, the opportunities here are endless. Right now, as we look from inside the fish bowl, that may seem like a far-fetched reality, but within the next 10-15 years, I believe the young generation will lead and bring drastic changes in the country. As the famous saying goes “get in before the blood runs dry”. So despite all the hurdles, I think this is the best time to make an impact in Nepal.

TNM: HOW WOULD YOU DESCRIBE THE ECONOMIC SITUATION OF NEPAL AND HOW DOES IT COMPARE TO THE PICTURE YOU HAD IN MIND WHEN YOU CAME BACK HERE?


NK: Theoretically, considering how
far behind we are compared to our neighboring countries and how much room we have to grow, our economy should be growing at a high rate each year. As a result, I always felt that Nepal has the potential to see great economic progress. However, due to multitude
of reasons, we have a tough time reaching even a growth of 5%. Various studies have shown that politicization
of almost every aspect of our country has hindered development activities. First, it is impossible for any country
to make significant economic progress without a stable government. Second, important laws and regulations which are detriment to kick start the economy are either non-existent or have been gathering dust at the parliament for years. Hence, it is no surprise that we are where we are right now.

More recently, we went through some very difficult times with the massive earthquake as well as the trade embargo, which hurt the economy to the core. However, one thing I did realize about our nature is that, as a nation, we are incredibly resilient. During the first 6 months of last fiscal year, our economy was literally at a standstill. People

were mainly focused on humanitarian work and restructuring, which was rightly a necessity at the time. However, surprisingly, during the second half of the fiscal year, things started shaping up as credit flow increased and financial indicators improved.

At present, our economy is gradually moving back to normalcy, however, the government needs to provide a conducive platform to support positive changes. The private sector is very ambitious and with the right environment and a gentle push, they can make significant strides. We may feel that we are behind when compared to other nations, but for me, it just means that we have that much more room to grow. In other words, they’re opportunities.

TNM: HOW WOULD YOU SAY THIS IMPACTS OUR STOCK MARKET AND INVESTMENT?


NK: I think it is important to understand the relationship between our stock market and our economy in general. In developed countries, their stock market consists of companies from various sectors such as banks, automobile, housing, insurance, railway, aerospace, commodities, energy, machinery, etc. which tend to form an integral part of the economy. As a result, the stock market paints a fairly good picture about how their economy is performing. Any new information quickly gets priced in as the system is highly efficient.

Nepal’s stock market, on the other hand, is quite the opposite. Some 70% of the stocks that are listed in Nepse are either banks or other financial institutions. Theoretically, this implies that if every other sector were to perform poorly with only the banking industry profitable, Nepalese could still dole out positive returns despite the economy faltering. Hence, this may not be a very realistic measure of how our economy is performing.

We should also note that our stock market tends to be immune to external events. When Greece was going through a debt crisis, it had a huge impact on the U.S. stock market, while it barely made news in Nepal.
So when investing, it is important to understand what the actual variables that truly affect our market are. Hence, recognizing the right variables is essential to perform well in the market.

TNM: WHAT DID YOU SET OUT TO ACCOMPLISH WITH JAGUAR INVESTMENTS?

NK: Since my return from
the U.S., I gradually began
to take notice of the actual business climate in Nepal.
On the one hand, I was able
to meet highly skilled young talents with great, innovative ideas, however, they lacked the funding required to take their projects forward. As many do not have adequate collateral or financial backing, their proposals
for funding are deemed ‘too risky’ and tend to get turned down by financial institutions. Since project financing is almost non-existent in Nepal, entrepreneurs have very few options to obtain required funding. On the other hand,
I had the opportunity to
meet many people from various walks of life who
had abundance of funds but always complained about lack of investment opportunities
in Nepal (besides shares
and real estate). For me, this spelled an opportunity to connect the two parties or become the much-needed bridge between the investor and the entrepreneur. This way, entrepreneurs would
get the funding they required, and investors would find new avenues for investments.
This was definitely one area where I realized Jaguar could provide meaningful value
in our goal to promote the capital market. This would also give us an opportunity to invest in ventures with great potential, and help them grow by providing fresh capital, new ideas and technological resources.

Another opportunity that became quite apparent was the considerable need for professionally-managed fund management services in Nepal. Though there are a few institutions that provide such services, this market is largely untapped. At present,it is important to educate people about the importance as well as benefits of fund management service. In
that line, we hope to provide Portfolio Management Services in the near future as well.

TNM: TELL US ABOUT ANY NEW INITIATION AND/OR VENTURES.


NK: We are continuously looking for new opportunities to make strategic investments into. However, they need to meet specific criteria in terms of innovation, finances, future prospects, etc. Keeping that in mind, we have recently entered into
a partnership with a few dynamic entrepreneurs as well as financial enthusiasts to operate an upcoming financial news portal. We want to provide professional, accurate and unbiased news as well as educative information to the public.
I believe better access
to information plays an important role in increasing public awareness as well as making our capital market more robust.

TNM: WHAT WOULD BE YOUR ADVICE TO THE INVESTORS IN THE CURRENT SCENARIO?


NK: As per the general trend, new investors tend to arrive late into the market which makes them highly susceptible to any volatility in the market. Many long- term investors who have been in the market for years may feel immune to high market fluctuations as their average cost tend to be very low. Sometimes, a little bit of patience is all you need to be a successful investor or trader. However, I would like to provide a word of caution to new investors who have recently entered the market or those that trade solely based on rumors. Always receive any new information with criticism. Instead of running after rumors, it would be wiser to make an effort into learning a few financial figures and ratios. Fundamental aspects of a company tell you about its performance as well as its standing when compared to its competitors. There are also various classes offered for fundamental and technical analyses that may give you an edge in the market. Personally, I would like to help promote financial literacy among investors through training classes in the future.

I also believe that it is essential for investors to understand the importance of diversification. It is always a good idea not to put all your eggs in the same basket. Diversification should be done through different sectors, and if possible, through different asset classes. However, it is also equally important to not over-diversify your holdings. As Warren Buffett quite eloquently put it, “Wide diversification is only required when investors do not understand what they are doing.”

TNM: WHAT WOULD YOU RECOMMEND TO SMALL INVESTORS?


NK: For small investors, who do have time to spare, I would advise them to seek professional advice and do some homework on stocks they own. It is important to follow up or review your stocks at least once or twice
a week. For novice investors, it is usually a good idea
to stick to the leaders in each sector as they tend to be relatively safe. But for those who are generally busy
in their own line of work and cannot contribute time to research their stocks, it would be ideal to let seasoned fund managers help manage their funds. This is not to say that they will be able to provide you with the best returns all the time, but your funds will be managed by capital market enthusiasts who constantly monitor your portfolio. Another option would be to buy mutual funds which are diversified among various sectors.

TIPS FOR INVESTORS IN THE MARKET

  • Diversify your holdings (through various sectors and asset classes) – but do not over diversify
• Pick the best companies in the industry
  • Be wary of rumors
  • Make an effort to personally study a company’s performance
  • If time does not permit or you are not
sure how market works, be open to letting professional fund managers handle your funds or you can simply invest in mutual funds.
  • Diversification is key.
  • In the stock market, patience is definitely a virtue.

WHERE TO INVEST

  • This usually depends on how risk averse you are or if you’re investing for the short term, long term, or a mix of both. This will determine your investment strategy.
  • For me, in the share market, I’ve been long or overweight on non-life insurance and microfinance over the last 2-3 years. And
I still see high potential in these 2 sectors especially non-life insurance.
  • I’m also interested in mid-cap commercial banks for mid-term.
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