Mutual funds and other institutional investors are increasing their exposure to Nepal’s stock market even as trading activity at the Nepal Stock Exchange (NEPSE) remains under pressure.

According to NEPSE data, mutual funds had invested Rs. 68.19 billion in the share market by mid-August 2026, up 1.77% from Rs. 67.01 billion a month earlier.

The investment increased by Rs. 1.18 billion in a single month, with both newly launched mutual funds and existing funds contributing to the rise through additional share purchases.

The increase suggests that institutional investors remain relatively positive toward the stock market despite its prolonged weakness. Market participants say the gradual accumulation of shares by larger investors could indicate that they are positioning themselves for a potential recovery.

Among individual funds, Sanima Equity Fund-2 recorded the highest percentage increase in secondary-market share investment during the review period. Its investment rose by 106.97%, from Rs. 54 million to Rs. 104 million.

Similarly, Citizens Balanced Scheme increased its stock market investment by 24.77% in one month, taking its portfolio to more than Rs. 1.15 billion.

Market analysts attribute the growing institutional interest partly to declining bank deposit interest rates. As returns from fixed-income deposits have fallen, institutional investors have increasingly looked toward equities for potentially higher returns.

The prolonged slowdown in the stock market may also be encouraging large investors to accumulate shares gradually rather than make aggressive purchases at once.

Meanwhile, demand for margin loans has also been increasing among both individual and institutional investors.

According to Nepal Rastra Bank data, margin lending by banks and financial institutions reached Rs. 166 billion by the end of FY2082/83, compared with Rs. 140 billion a year earlier.

Equity-backed loans exceeding Rs. 10 million alone stood at Rs. 119 billion, highlighting the continued use of borrowed funds for stock market investment.

The simultaneous increase in mutual fund exposure and margin lending points to growing participation from larger investors even as overall market activity remains subdued.