The Nepali share market, also known as the Nepal Stock Exchange (NEPSE), is the only stock exchange in Nepal and serves as the platform for trading securities like stocks, bonds, and mutual funds. Here’s a basic overview:
1. Nepal Stock Exchange (NEPSE)
- Established: 1993
- Location: Kathmandu, Nepal
- Index: The main index is the NEPSE index, which tracks the performance of all the listed companies.
- Regulatory Authority: Securities Board of Nepal (SEBON) regulates the share market in Nepal.
2. Types of Securities Traded
- Equity Shares: Common stocks of listed companies.
- Preferred Shares: Shares with preferential rights over common stocks.
- Debentures: Long-term debt instruments issued by companies.
- Mutual Funds: Funds that pool investments from various investors to invest in a diversified portfolio.
- Government Bonds: Bonds issued by the Government of Nepal.
3. Trading Mechanism
- Online Trading: Investors can trade shares online through licensed brokers.
- T+2 Settlement: Transactions are settled on the second business day after the trade (T+2).
- Brokerage Firms: Investors must use licensed brokers to buy or sell shares.
4. Investing in the Nepali Share Market
- Opening a Demat Account: Investors need to open a Demat account with a Depository Participant (DP) to hold shares in electronic form.
- Trading Account: Required to execute trades through a broker.
- Initial Public Offerings (IPOs): Companies offer shares to the public for the first time, which investors can subscribe to.
- Secondary Market: Buying and selling of shares that are already listed on NEPSE.
5. Key Indicators
- NEPSE Index: The overall market index that reflects the performance of listed companies.
- Sub-Indices: Sector-specific indices like Banking, Insurance, Hydropower, etc.
- Market Capitalization: The total value of all listed shares on the exchange.
6. Risks and Rewards
- Volatility: The NEPSE can be volatile, with significant price fluctuations.
- Market Trends: Influenced by political stability, economic conditions, and investor sentiment.
- Dividends: Some companies provide regular dividends, which can be a source of income for investors.
- Capital Gains: Profits made by selling shares at a higher price than the purchase price.
7. Legal Framework
- Securities Act 2006: Governs the regulation of the securities market.
- Company Act 2006: Governs the incorporation and operation of companies.
8. Recent Trends
- Increasing participation of retail investors.
- Growth in online trading platforms.
- Development of new financial products like mutual funds and bonds.
9. Investor Education
- Workshops and Seminars: SEBON and NEPSE often conduct investor education programs.
- Online Resources: Websites of NEPSE, SEBON, and brokerage firms provide educational materials.
10. Challenges
- Market Depth: The market is still developing, with fewer listed companies compared to global standards.
- Liquidity: Limited liquidity can make it challenging to buy and sell large volumes of shares.
- Regulatory Oversight: Ensuring transparency and protecting investors remains an ongoing effort.
Understanding the basic workings of the Nepali share market is crucial for anyone looking to invest in it, as it comes with its own set of opportunities and risks.