A Thesis Proposal

"Portfolio Management of Listed Commercial

Banks in Nepal"
In the partial Fulfillment for the Requirement of
Master's Degree in Business Study

Submitted By:
Asha Jaiswal
T.U. Regd. No.: 7-2-329-34-2004
Exam Roll No.: 3290015
Campus Roll. No.: 16

Submitted To:
Faculty of Management
Siddhanath Multiple Campus
Tribhuvan University
Mahendranagar, Kanchanpur

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 A Thesis Proposal
"Portfolio Management of Listed Commercial
Banks in Nepal"

Background of the study:

A portfolio is combination of investment assets. The portfolio is
the holding of securities and investment in financial assets that is
bonds, stock portfolio mgmt is related to the efficient portfolio
investment in financial assets. It can reduce unsystematic risk without
losing considerable return. Therefore we need to extend our analysis of
risk & return of portfolio context.
Portfolio mgmt in concerned with efficient mgmt of Portfolio
investment in financial assets, including shares & debenture of
companies. The process of Portfolio mgmt of companies. The process
of Portfolio mgmt is closely & directly liked with process of design
making, the correctness of which can not be insured in all cases. The
objective of Portfolio analysis is to develop a portfolio that has the
maximum return at whatever level of risk, the investor seems
appropriate. Investment is the employment of the funds with the aim to
achieving addition income of growth in value. It involves the
commitment of the researcher that have been saved or put away from
consumption for the future. A good investment policy attracts both
borrower & lenders which helps the investment operation of the bank to
be efficient and profitable by minimizing inherent risk.
Modern banking history of Nepal began from the establishment of
Nepal Bank Ltd. in 1936. In 1956 Nepal Rastra Bank came in existence
as a central bank of our country. According to, Bank and financial
ordinance 2060, "Bank and financial institutions can be merged in one
another." Commercial banks are increasing day by day in Nepal. There
are 23 commercial banks in Nepal. The focus of study is on portfolio

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mgmt of listed commercial banks in Nepal. Such as Nepal SBI Bank
Ltd. NABIL Bank Ltd. NIC Bank Ltd, Nepal Investment Bank Ltd. &
Himalayan Bank Ltd. This study is designed to describe to minimized
risk & maximized return by portfolio mgmt & existing situation of
portfolio mgmt of the commercial bank in Nepal.

Statement of Problem:
Most of the Nepalese investors have formulated their investment
policy in an unorganized manner. They do not seem to be capable to
invest their funds in more profitable sectors and only interested in less
risky and liquid sectors. There is problem of capital formation and it's
proper utilization. They do not consider portfolio optimization.

Objective of the Study:

In the existing competitive environment investors face many
problems to mobilizes their deposit on profit making investment. The
general objective of the study are to analyze, examine and interpret
technique followed by the investor on their investment. The specific
objectives of the study are as follows:
♦ To evaluate common stock investment in terms of risk and return.
♦ To analyze deposit and government securities in terms of risk and
return.
♦ To analyze portfolio risk and return.
♦ To provide suggestive package based on the analysis of the data.

Significance of the study:

This study will be concise, practicable, usable and valuable to
major parties intended in portfolio mgmt of investors. This will be useful
to the mgmt students, researchers and even to the experts. Nepalese
investors or institution do not have clear view towards effective

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investment. Hence, the significance of the study will be minimize risk in
common stock investment and maximize return through portfolio
analysis, the study will fulfill the need in this aspects. Similarly the firms
would follow the suggestion to make the policy and strategy more
practical and scientific.

Limitation of the study:

It has certain limitations:
♦ This study has employed secondary & primary data published by
and collected from selected banks.
♦ Only financial aspects are analyzed, other performance of bank is
neglected while providing suggestion.
♦ This study concentrates only on those factors which are related
with portfolio mgmt and available in the form required for
analyzing the different issues.
♦ This study is focused on the listed commercial bank namely
Nepal SBI Bank Ltd., NABIL Bank Ltd. and NIC Bank Ltd.
♦ The data of the study will be taken of the duration of 2006 to
2010.

Literature Review:
Portfolio mgmt is the process of selecting a bundle of securities
that provides the investing organization a maximum field for a given
level of risk or a alternatively ensuring minimum level of risk for a given
level of return. It can be also taken as risk & return mgmt. Some studied
had been done of the portfolio mgmt by different scholars.
"A portfolio is a bundle of combination of individual assets or
securities." (Pandey, 1997: 329). According to Weston & Copeland
(2003:366) "Portfolio theory i.e. portfolio that provide the highest
possible return for any specified degree of risk or the lowest risk for any

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specified rate of return." Weston & Brigham (1992:123) define a
portfolio as a collection of investment securities. In the words of Keith
Ambach Scheer portfolio mgmt concerned itself with selecting good
stock or bonds are fading. According to Cohen, Zinbarg and Zeikel
(1978) "Portfolio mgmt is the art of handling a pool of funds so that it not
preserves it' original worth but also overtime appreciates in value and
fields an adequate return consistent with the level of risk assumed."
Sharpe et al (2003) define "investment as sacrifice of current
dollars for future dollars." In the words of Cheney and Moses (1992)
investment brings forth visions of profit, risk, speculation and wealth."
They have briefly described categories and types of investment
alternatives objectives, the expected rate of return, the expected risk,
taxes, the investment horizon and investment strategies are the factors
to be considered in choosing among investment alternatives."
Return is reward for investment. Fisher and Jordan (2000) have
discussed about component of return. They have identified returns is
the composition of periodic ash receipts and change in price of assets.
Cheney and Moses (1992) explain return in terms of single period. They
have defined it as holding period return and calculated by comparing
the return to the amt. initially invested. Sharpe et al (2003) define risk as
the divergence of an actual return from an expected return and
identified standard deviation as a measurement of such divergence.
Clarke's (2000) explains standard deviation and variance are equally
acceptable and conceptually equivalent quantitative measures of assets
total risk.

Research Methodology
Research methodology is a way to systematically solve the
research problem. It plays a significant role for a research work. The
various methods will be used for the research such as field visit, field
observation, interview, sampling questionnaire etc. The primary data will

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be collected from informal inquiries and dialogues with authorities of
related institutions. Risk and return analysis and other financial and
statistical tool are used to achieve the goal. The secondary data will be
collected from different books, magazines, previous researches, and
different websites and so on.

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 Reference

♦ Cheny, John M. and Edward A. Moses (1995), fundamentals of

Investment. 10th edition. St Paul; West Publishing Company.
♦ Frank & Reily (2004) Investment 5th edition Chicago: The Dryden
Press.
♦ Francis, Jack Clarke (2000), "Investment analysis and
management". New York MC. Graw Hill, Jnc.
♦ Pandey J. M. (1997), Financial Mgmt. 7th edition New Delhi: Vikas
Publishing House Pvt. Ltd.
♦ Sharpe W.F., Gordan J.A. and Jeffery V.B., "Investment",
Prentice Hall of India Pvt. Ltd. New Delhi, 2000.
♦ Weston J. Fred & d. Eugene I. Brigham, (2005) essentials of
managerial finance 9th edition, Chicago, The Dryden Press.
♦ Weston I. Fred & Thomas E. Copeland, (2003) Managerial
finance 9th edition Chicago; The Dryden Press.

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