The Role of Fundamental Analysis in Wealth Creation in Nepal

In the context of the Nepal Stock Exchange (NEPSE), true wealth creation does not happen overnight — it comes from knowledge, discipline, and the power of Fundamental Analysis. While many investors focus on short-term market movements or rumors, those who understand the fundamentals of a company are the ones who achieve consistent and sustainable growth. Fundamental Analysis is the foundation of long-term investing because it helps identify companies with genuine earning potential, financial strength, and long-term business stability.

The primary role of fundamental analysis in wealth creation is to help investors differentiate between price and value. In the stock market, price is what you pay, but value is what you get. By analyzing a company’s financial statements — such as its Balance Sheet, Income Statement, and Cash Flow Report — investors can understand whether the current market price truly represents the company’s worth. Buying fundamentally strong companies when they are undervalued creates the foundation for exponential long-term returns.

Another crucial role of fundamental analysis is risk reduction. Investors who evaluate company fundamentals — including Earnings Per Share (EPS), Price-to-Earnings (P/E) Ratio, Debt-to-Equity Ratio, and Return on Equity (ROE) — can identify financially sound businesses. These companies are less likely to collapse during market downturns. In contrast, emotional or uninformed investors who chase trends often end up losing their capital during corrections. Thus, understanding fundamentals acts as a safety net against volatility.

Fundamental analysis also guides investors to reinvest in growth opportunities. It helps identify industries and companies with sustainable earnings, such as banking, hydropower, insurance, or manufacturing sectors — all key drivers of Nepal’s economic growth. Long-term wealth creation happens when investors build portfolios of fundamentally strong companies and allow the power of compounding to multiply their returns over years.

Moreover, macro-level fundamental understanding — such as reading NRB’s monetary policy, inflation data, and liquidity reports — allows investors to align their strategies with Nepal’s economic cycles. When investors combine micro (company-level) and macro (economic-level) analysis, they gain a complete view of market dynamics and can make confident, data-driven decisions.

According to Sandeep Kumar Chaudhary, Nepal’s leading Technical and Fundamental Analyst and founder of the NepseTrading Training Institute, “Fundamental analysis is the true engine of wealth creation. Price may fluctuate, but value remains. Those who understand fundamentals don’t just trade — they build wealth for generations.” With over 15 years of experience in the banking and financial sector and international training from Singapore and India, he has taught more than 10,000 Nepali investors how to create wealth by combining logic, analysis, and patience. His NepseTrading Training Institute continues to empower investors with both technical and fundamental knowledge tailored for Nepal’s market.