CHAPTER 1

INTRODUCTION
1.1 History of Share Market in Nepal
The history of capital market in Nepal dates back to 1936 (1997 B.S.), the year in which the shares
of Biratnagar Jute Mills Ltd. were floated. In 1937, Tejarath Adda was set up to facilitate loans to
the government employees and was converted into Nepal Bank Ltd. HMG Nepal introduced the
Company Act in 1964 and issued 6 percent 5 years government bonds through Nepal Rastra Bank
to collect the developmental expenditures. HMG Nepal announced the Industrial Policy in 1974
and under this policy an institution named Securities Marketing Center (SMC) was established to
deal in government securities-development bonds, national savings bonds, and corporate securities
of few companies. At that time, the government has the virtual monopoly over the security market.
Then, Securities Exchange Center (SEC) was established in 1976 with an objective of facilitating
and promoting the growth of capital market. It was the only capital market institution in Nepal.
Securities Exchange Act was surfaced in 1984 after which the SEC started to operate under this
act. The purpose of this act was to provide systematic and favorable market environment for
securities ensuring and protecting the interest of individuals and institutional investors as well as to
increase

the

public

equity participation in various firms and companies. SEC had provided facilities to trade thegovern
ment securities and few of corporate securities like shares and debentures. In the initial phase, the
center listed only the shares of 10 companies and operated without members i.e. brokers and
dealers. So, initially SEC itself undertook the job of brokering, underwriting, managing public
issue, market making for government bonds and other financial services. Apart from this, there was
the absence of effective secondary market to ensure liquidity to the securities. The interim
government (1990/91) initiated financial reform program and two indirect investment vehiclesCitizen's Investment Fund and NIDC Capital Markets Ltd. was established with the collective
investment schemes in the corporate sector. Then, due to the rapidly growing privatization and
economic liberalization, the operation of SEC was felt to change to make it compatible with the

changing economic system. As a result, HMG Nepal brought about change in the structure of SEC
by dividing it into two distinct but integrated entities called Securities Board of Nepal (SEBON)
and Nepal Stock Exchange Ltd. (NEPSE). Since then they are operating as the main bodies of
securities market in Nepal.

1.2 Introduction to Securities Board of Nepal (SEBON)

Securities Board of Nepal commonly known as SEBON was established on June 7, 1993 with its
mission to facilitate the orderly development of a dynamic and competitive capital market and
maintain its credibility, fairness, efficiency, transparency and responsiveness under the Securities
Exchange Act 1983. It acts as an apex regulator of the securities market in Nepal. The major
function of the SEBON is to look after registration of the securities and approval of the public
issues. However, the objectives and functions of SEBON captures multi-dimensional role in
enhancing the efficiency of security market in Nepal.

1.2.1. Objectives and Functions

As mentioned earlier, SEBON looks after the regulation of the security trading and security
market in Nepal. Moreover, it frames the policies and programs required to monitor the securities
market. As per the Securities related Act, 2007, the major functions of SEBON are as follows:
a. Register securities of public limited companies.
b. Approve prospectus for issuing securities.
c. Provide license to operate stock exchanges.
d. Provide license to operate securities businesses.
e. Permit the operation of collective investment schemes and investment fund programme.

f. Draft regulations, and issue directives and guidelines.

g. Supervise and monitor stock exchanges and securities business activities.
h. Take legal action against the non-compliance companies as per the legal provisions.
i. Conduct research, study and awareness programmes regarding securities markets.
j. Advise the Government of Nepal to formulate policies and programmes relating to securities
market as and when required.
k. To supervise and monitor the functions and activities of securities-dealers.
l. To grant permission to operate collective investment schemes and investment fund programs,
and to supervise and monitor them.

1.2.2 Organizational Structure

The organizational structure of SEBON has seven departments and sixteen sections. Presently,
there are 37 staffs (including chairman) in SEBON. Out of 37 staff, 20 staffs are at officer level
and remaining in assistant level and support the staff. The current staff remain inadequate to
perform various functions and to tackle with many issues and challenges of the Board including
the current size of the market, challenges of market supervision and legal enforcement and need of
increasing use of information technology for human resource management and market supervision,
conducting and encouraging research on the area of capital markets, conducting investors'
education and awareness building programmes continuously, and formulate and implement capital
market master plan in order to improve regulation and supervision of capital market. Recently
conducted research in SEBON revealed the need of staff especially human resource manager,
researcher and statistician, computer programmer, and librarian to be inadequate.
a. The Board:

The Governing Board of SEBON comprises seven members representing from various
government and non-government sectors. The seven-member board includes a full-time
Chairman appointed by the Government of Nepal for the tenure of four years. Other
members of the Board are joint secretary from Ministry of Finance, joint secretary from
Ministry of Law, Justice and Constitutional Assembly Affairs, a representative from the
Nepal Rastra Bank, a representative from Institute of Chartered Accountants of Nepal, a
representative from Federation of Nepalese Chambers of Commerce and Industries, and an
expert member appointed by the Government of Nepal.

b. The Committee
SEBON has six different committees performing varieties of functions. The governance
committee provide information, advice and feedback for the formulation and improvement
of policy and procedure relating to the functions of Board, making its activities more
transparent, efficient and public oriented by monitoring the service delivery and
governance, SEBON has formed a 'Governance Committee' under the convener of
Chairman comprising two directors and deputy directors from the Management Department
and Legal Department as members. In order to make prospectus of issuing companies more
informative and credible 'Securities Registration and Issue Approval Committee' with
representatives from SEBON and Company Registrar Office (CRO) is in operation.
Provision has also been made for the representation from the Nepal Rastra Bank and
Insurance Board in the committee as and when required. SEBON has formed 'Financial
Administration and Financial Information Analysis Committee' under the convener of
Board member representing from the Institute of Chartered Accountants of Nepal
comprising Heads of the Management Department, Financial Information Analysis
Department and Finance Section as members with the objectives of developing the
recording and reporting formats of financial information by stock exchange, securities
businesspersons and listed companies which to be kept in their offices, submitted to
Securities Board of Nepal and stock exchange along with the objectives of finalizing the
annual budget and programme of the Board, updating and reviewing the annual budget and
4

expenditure, reviewing the audited report from the auditor and drafting the response to the
audit report. In order to provide recommendations on organization structure of Board, need
of manpower, management information system, delegation of authority, returns and
privilege to members and staff of the Board, a 'Institutional Reform Committee' was
formed under the convener of the expert member of the Board comprising Head of the
Management Department as member and Head of the Corporate Finance Department as
member secretary. In order to improve in the compliances of the securities related
legislations and to provide suggestions by reviewing the drafted securities legislations and
directives, Legal Enforcement Committee has been made. Likewise, investigation
committee was formed under the 5 convener of director in order to perform the initial work
relating to legal enforcement and to provide necessary assistance for the activities relating
to legal enforcement committee. The committee investigated the case against the NICM
performing share registrar activities without license and submitted the report to Board.

1.3 Introduction to Nepal Stock Exchange (NEPSE)

NEPSE Ltd. is a non-profit organization, operating under Securities Exchange Act, 1983.
NEPSE opened its trading floor on January 13, 1994 through its newly appointed licensed
members with an "Open Out-Cry" system for the transaction of securities with 25 brokers
and 3 market makers. NEPSE, the successor to the Securities Exchange Centre (which was in
existence since 1976), was intended to assume a lead role in the activities more confined to
the operation of the securities market, while the Securities Board was created to function as
the body responsible for the oversight regulation of the securities market. Nepal Government,
under a program initiated to reform capital markets converted Securities Exchange Center
into Nepal Stock Exchange in 1993. The trading floor is restricted to listed corporate
securities and government bonds with the market intermediaries in buying and selling of such
securities. The initial improvement of the transparency of operations at the Exchange with its
restructuring generated an interest among the investing public in Nepal, and NEPSE
experienced a substantial increase of activity both in the primary as well as the secondary
markets. A number of companies had successful initial public offerings, with the share issues
5

oversubscribed on many occasions. NEPSE is a secondary market where already issued

shares are traded. Government of Nepal, Nepal Rastra Bank, Nepal Industrial Development
Corporation and members are the shareholders of NEPSE.

1.3.1Functions and Objectives

The basic objective of NEPSE is to impart free marketability and liquidity to the government
and corporate securities by facilitating transactions in its trading floor through market
intermediaries such as brokers and market makers, etc. Some of other functions and
objectives of NEPSE which also come in preview of SEBON are listed as:
a. To systematize the task of clearing accounts related to transactions in securities.
b. To supervise whether or not security dealers are behaving in the manner prescribed in
this Act, or the rules and the bye-rules framed under this Act, while conducting business of
dealing in securities, and suspend the license to conduct the business of dealing in
securities in case any securities dealer is not found to be behaving accordingly.
c. To make or ensure necessary arrangements to regulate the volume of securities transacted
and the procedure of conducting such transactions in order to ensure the promotion,
development and clean operation of stock exchanges.
d. To make necessary arrangements to prevent insider trading or any other offenses relating
to transactions in securities in order to protect the interest of investors in securities.
e. To systematize and make transparent the act of acquiring the ownership of a company or
gaining control over its management by purchasing its shares in a single lot or in different
lots.
f. To establish coordination and exchange cooperation with the appropriate agencies in
order to supervise and regulate matters concerning securities or companies.

g. To discharge or make arrangements for discharging such other functions as are necessary
for the development of securities and the capital market.

1.3.2Organizational Structure
The Board of Directors (BOD), which governs NEPSE, constitutes of members representing
different sectors as per Securities Act 2006. At Present, the BOD constitutes 2 Members
including a chairman from Nepal Government, 2 Members from Nepal Rastra Bank, 1 from
NIDC. Moreover, one member will be nominated by BOD as an expert in capital market.
General Manager of NEPSE will serve as a director on the BOD. The board is the apex body
of NEPSE which takes on day to day activity of the stock exchange including various staffs
of different departments. Currently, the NEPSE has a board of 5 members including a
chairman and other 4 members from different sectors appointed by SEBON and Government
of Nepal. NEPSE operates with 59 broker members and 2 market makers. Besides this,
NEPSE has also granted membership to issue and sales manager securities trader (Dealer).
Issue and sales manager works as manager to the issue and 7 underwriters for public issue
securities whereas securities trader (Dealer) works as individual portfolio manager. At
present there are 11 sales and issue manager and 2 dealers (Secondary market)

1.4 Activities of NEPSE

In order to impart free marketability and liquidity to the government and corporate securities by
facilitating transactions in its trading floor through market intermediaries such as brokers and
market makers, NEPSE carries out following major activities.
1. Facilitates Trading
NEPSE provides the trading floor or interface between the buyers and sellers of the
securities. Equity shares, preference shares, debentures, government bonds and mutual
7

funds are traded in this market. NEPSE the only Stock Exchange in Nepal introduced fully
automated screen based trading since 24th August, 2007. The NEPSE trading system is
called NEPSE Automated Trading System (NATS) is a fully automated screen based
trading system, which adopts the principle of an order driven market.
2.

Admission of New Members

The membership of NEPSE has increased significantly in recent days. In recruiting
members NEPSE makes effort to levy an entry fee from the new members. The entrance
fee is one among many sources of revenue available to a Stock Exchange. New members
approach the Exchange for membership since they believe that the Exchange membership
would provide them with an opportunity to make profits. Such opportunities have been
made possible due to the investments made by the Exchange in the past in developing its
systems and procedures. In view of the rather subjective nature of the determination of such
fees, NEPSE should obtain the approval of the Securities Board prior to the implementation
of the entry fee.

3.

Market Operations
A noticeable improvement in the operation of the Stock Exchange has been made. The
computerized record-keeping of the trading, clearing and settlement information of the
Exchange is maintained. Mainly based on formats designed in January 1994, with
necessary amendments to suit subsequent changes in operational aspects, the switch to
computerize record-keeping has provided the Exchange management with a better handle
on monitoring the activities of the members. As a result, there has been a commendable
improvement in curbing the initiation of sale transactions without possessing valid sale
documents, and in reducing the accumulation of liabilities over and above the permissible
limits and the collection of settlement dues from member firms. In addition to maintaining
the information required to supervise the activities of the member firms in a more efficient
8

manner, the success in the better regulation of selected aspects of member post-trade
activities is also due to the willingness displayed by certain managers of the Exchange to
initiate action against errant brokers in a timely manner.
4.

Investor Awareness
It conducts various investor awareness programs and interactions in order to help the
investors to understand the regulations and the issues involved in the trading of the
securities. Such act of NEPSE helps in preparing the aware pool of the investors that could
be the building blocks towards developing an efficient investment environment in Nepal.

1.5Trading Mechanism of NEPSE

NEPSE is the secondary market in Nepal. The NEPSE has adopted an auction system of
trading securities. It means transactions of securities are conducted on the open auction
principal on the trading floor. In Nepal, in order to buying and selling securities in
secondary market buyer or seller should give order to certified broker filling the order slip
as per rules and regulation of NEPSE. The buyer or seller should mention the necessary
details information such as: name of the organization, type of stock, number of stocks and
price and time period i.e. applicable for both parties. After that placement of order, buyer or
seller collects ordering slip with registration number. Then the buy or sell orders are taken
to the floor of NEPSE by the broker or his\her representative. In the floor of stock
exchange, the buying broker with highest bid will post the price and his code number on
the buying column, while the selling broker with the lowest offer will post the price and the
code number on the selling column on the quotation board. The orders to buy and sell get
executed when the prices for buy and sell match. Once the orders are executed in the floor,
it is recorded in the exchange and is committed to buyer and sellers of the security through
brokers.

1.6Trading System of NEPSE

NEPSE, the only Stock Exchange in Nepal, introduced fully automated screen based
trading from 24th August, 2007. Significant developments have been made in the
secondary market in recent years, especially after the GoN decided to reform the capital
market.
The computerized trading system has replaced the open-cry-out system. The NEPSE
trading system is called NEPSE Automated Trading System (NATS) which adopts the
principle of an order driven market.
NEPSE has implemented the wide area network (WAN) system. Hence trading can be done
either from NEPSEs trading floor or from the brokers office. NEPSE uses a sophisticated
technology to help brokers easily perform their transactions.

1.7

Member of NEPSE
Members of NEPSE are permitted to act as intermediaries in buying and selling of
government bonds and listed corporate securities. At present, there are 59 member brokers
and 2 market makers, who operate on the trading floor as per the Securities Exchange Act,
1983, rules and bye-laws. Besides this, NEPSE has also granted membership to issue and
sales manager securities trader (Dealer). Issue and sales manager works as manager to the
issue and underwriter for public issue of securities whereas securities trader (Dealer) works
as individual portfolio manager. The tenure of the membership is one year. The license
should be renewed within 3 months after the closure of the fiscal year. If not, it can be done
within another three months by paying 25% penalty.

1.8

Market timing
Trading on equities takes place on all days of week (except Saturdays and holidays
declared by exchange in advance). On Friday only odd lot trading is done.

10

The market timings of the equities are: - Market Open: - 11:00 AM Market Close: - 15:00
PM
Odd Lot Trading is done on Fridays. For Odd Lot Trading Market Timings are Market
Open: - 12:00 PM Market Close: - 13:00 PM
The exchange may however close the market on days other than schedule holidays or may
open the market on days originally declared as holidays. The exchange may also extend,
advance or reduce trading hours when it is necessary.

1.9

Circuit Breaker
The index-based circuit breaker system applies at 3 stages of the NEPSE index movement
of 3%, 4% and 5%.These circuit breakers when triggered bring about a trading halt in all
securities.
In case of 3% movement either way, there would be a market halt for 15 minutes if the
movement takes place during first hour of trading i.e. 13:00 PM. In case this movement
takes after 13:00 PM there will be no trading halt at this level and market shall continue
trading.
In case of 4% movement either way, there would be a market halt for half an hour if the
movement takes place before 14:00 PM. In case this movement takes after 14:00 PM there
will be no trading halt at this level and market shall continue trading.
In case of 5% movement in either way, trading shall be halted for the remainder of the day.
No trading shall be done for the day after 5% of movement in NEPSE.
There is one credit rating agency i.e. ICRA Nepal that does ratings of the companies

1.10

Listing Information
Trading on the floor of the NEPSE is restricted to listed corporate securities and
government bonds. At present, 230 companies have listed their securities to make them
eligible for trading.

11

1.10.1 Listing & Annual Fee to be Submitted

For Shares, Debentures and Mutual Funds

S no

Issued Capital

Listing Fee

Annual Fee as per issed

capital

Upto 10 million

0.20% or minimum

Rs. 15000

15000
0.15% or minimum
2

Rs 10 million to Rs 50 million

Rs. 50 million to Rs. 100 million

Above Rs. 100 million

45,000
0.10% or minimum

Rs 25000

75,000
0.075% or minimum

Rs. 35000

100,000

Rs.50000

1.10.2 Number of listed brokers

As of today, there are 58 licensed Brokers in the Nepalese Security Market and some example
of brokers are mentioned as:

Brokerage House

License #

Address

Phone

ABC Securities Private Limited

17

19,Prithvi Marg,Dharan-1

025-524083

ABC Securities Private Limited

17

Kathmandu,

4230787

Agrawal Securities (PVT) Ltd.

Main Road, Biratnagar

021-531667

12

Agrawal Securities (PVT) Ltd.

Dillibajar, Radhey Marg

4424406, 4424657

Arun Securities (PVT) Ltd.

Putalisadak, Glass House

14239567

CHAPTER 2
PRESENT SCENARIO OF NEPSE
2.1 National Capital Market
13

The activities of the Nepalese Capital Market tumble during the fiscal year 2071/72 as
compared to fiscal year 2070/71. Indicators of secondary market like turnover and market
capitalization decreased during the fiscal year. The catastrophic earthquake on the last 6
NEPSE Annual Trading Report 2014/2015 quarter of the fiscal year and subsequent
aftershocks affected the capital market too. The market was close for nineteen trading days
due to the earthquake. Its signaling effect contributes a lot to slump various capital market
indicators but at the end of the fiscal year the political settlement push up the market. The
activities of both primary and secondary market have been explained as follow: 2.2.1
Primary Market The total amount approved by Securities Board of Nepal (SEBON),
regulator of capital market in Nepal, for the primary issuance to public on the FY 2014/15
was of Rs. 14235.33 million from 48 numbers of approvals including ordinary shares, right
shares, mutual fund and debentures. This is an increase of 95.90 per cent in total amount
compared to the previous fiscal year. Out of the total approvals for public issues, 18
companies get approvals for initial public offering (IPO) of Rs. 6977.34 million. This is also
an increase of 200.29 percent on the amount when compared with the previous year. During
the same period five companies get approval to issue debenture for the amount of Rs. 2900
million. Likewise, three mutual fund has been approved during the review period amounting
Rs. 2050 million. Similarly, total 22 approvals were provided to companies to issue right
shares amounting to Rs. 2307.99 million which is a decrease of 45.61 per cent in amount
when compared to the previous year.

Source: SEBON

14

Following chart shows the capital mobilization trend for the last ten years in the primary market.

Capital Mobilization Through Primary Market

2.2 Secondary Market

15

Secondary market addresses liquidity requirements of the investors. Almost all change in
economy and listed companies is reflected in the price of securities. The political changes and
natural disaster in the country has impacted Nepalese capital market during the fiscal year
2014/15. The indicators of secondary market like NEPSE Index, annual turnover, number of
transaction, turnover to market capitalization and average price per share traded have been
decreased in the review period.

2.2.1 Turnover
Turnover in secondary market is one of the important indicators of capital market. Trading
volume in last fiscal year had increased tremendously by 258.64 percent as compared to the
fiscal year 2012/13 but during this fiscal year the trading volume has decreased slightly by
15.48 per cent as compared to fiscal year 2013/14.

16

During the FY 2014/15, turnover of Rs.65.33 billion has been realized which was Rs. 77.29
billion last year. Similarly, during the review period, 159.72 million numbers of shares have
been traded which is a decrease of 25.41 per cent compared to a year earlier. Accordingly,
numbers of transactions have also decreased by 15.73 percent to 477278. It was 566389 last 8
NEPSE Annual Trading Report 2014/2015 year. As compared to previous fiscal year there is
a decrease in trading volume, number of shares traded and also in number of transaction
which shows that NEPSE was in diminishing trend during the fiscal year. There was slight
increase in number of scripts traded during the year to 271 which was 269 in previous fiscal
year. The total trading days has decreased during the year to 216 for the market was closed
due to earthquake on the last quarter of the fiscal year. The daily average turnover counts for
Rs. 302.89 million in the review year; it was Rs. 336.75 million a year back and Rs. 93.08
million in the previous year.

2.2.2 Group-wise Distribution of Turnover

The listed companies in NEPSE has been divided into nine sectors namely commercial banks,
development banks, finance companies, hydropower companies, hotels, trading companies,
manufacturing and processing companies, insurance companies and other companies.
Furthermore, transaction details of promoter shares, mutual funds, preferred stocks are
included in the table below.

17

By reviewing the group-wise market capitalization composition, banks and insurance companies
recorded the highest of the total market capitalization as usual. Commercial banks group
contributes about 50.16 percent of the total market capitalization and insurance group contributes
about 13.51 percent of the total market capitalization. Both commercial and insurance group has
decreased by 11.86 percent and 5.35 percent respectively from the opening market capitalization
for the FY 2014/15. The market capitalization of development bank group and manufacturing and
processing group has increased significantly by 15.92 percent and 46.97 percent respectively as
compared to the opening figure. The above group-wise market capitalization shows that Nepalese
capital market is highly concentrated on banking sector during the period. It can be clearly shown
in the following figure.

Group-wise Distribution of Market Capitalization

18

Source: NEPSE
Market capitalization-GDP ratio has decreased to 46.57 per cent this year which was 54.81 percent
in the fiscal year 2070/71 and 30.24 per cent in the fiscal year 2069/70. Similarly, the ratio of
annual traded amount to market capitalization has also decreased to 6.60 percent from 7.30 per
cent in the previous year. It shows that during the review period, number of traded shares hence the
liquidity in the market has decreased as comparison to previous fiscal year.
The trend of market capitalization for last 5 years is presented in the following figure.

19

Market Capitalization for Last Five Fiscal Years (Rs. in Billion)

2.3 Indices
Index is one of the most important indicators of secondary market which is also considered as
barometer of countrys economy. NEPSE index group consists of various indices and they are
calculated on the basis of market capitalization. Out of them overall NEPSE index is the
oldest one which is being calculated since 1994. Similarly the other indices are sensitive
index, group-wise index and float index.

Overall NEPSE Index

NEPSE Index is calculated by considering all listed shares including that of promoter shares
of all listed companies in Nepal Stock Exchange Limited. As other secondary market
20

indicators, NEPSE Index was in decreasing trend during the FY 2014/15. The closing NEPSE
index remains at 961.23 and the highest point during the year was 1083.55 on 21 July 2014
and the lowest is recorded in 27 May 2015 of 837.83 points. NEPSE index has decreased by
84.66 points which is 8.09 percent during the year. The mean index throughout the year is
940.74 point and standard deviation is 79.48 which show that NEPSE was less volatile during
the year compared to last year when the standard deviation was of 144.21. The trend of overall
NEPSE index can be viewed from the following figure: 14 NEPSE Annual Trading Report
2014/2015
NEPSE Index in FY 2014/15

Source: NEPSE

2.4 Reason for outgrowth of Stock Market in Nepal in Present Scenario

The stock market index has been growing even after the devastating earthquake and economic
blockade. The reason for outgrowth of stock market is given as below:
21

a. Lack of Investment Alternatives

Nepal has few investment alternatives. So, even after the earthquake and blockade, people
preferred to invest in stock market as it is results more profit in short-term and in case of
other alternatives like real estate, its transaction showed downtrend as investors did not feel
secured to invest in buildings and land after the earthquake.
b. Lack of Employment opportunities
Due of lack of employment opportunities, the unemployed people preferred to invest in
security market as it can generate profitable income in short time period.
c. Increased Remittance
Investors preferred to invest the money from remittance in stock market as they didnt feel
safe to deposit the money in financial institutions or in real estate or precious metals like
gold as they felt unsecured due to regular aftershocks.
d. Inverse Relationship with Real Estate
There is inverse relationship of stock market and real estate. After the earthquake, the
investment transaction in real estate has decreased and thus, the investors invested in stock
market since they thought it is safer in real estate.

CHAPTER 3
SUMMARY AND CONCLUSION
3.1 Summary
The overriding purpose of this study was to find out the past trend and present situation of
Nepal Stock Exchange. To accomplish that goal, several websites were taken into
consideration. Once the objectives were achieved, this study was able to go forward.
Actually, A stock exchange is an exchange where stock brokers and traders can buy and/or
sell stocks (also called shares),bonds, and other securities. Stock exchanges may also provide
22

facilities for issue and redemption of securities and other financial instruments, and capital
events including the payment of income and dividends. Stock market began with the issue of
shares by Biratnagar jute mills Ltd. in 1937. Security Marketing Center (SMC) was
established in April 1977 under Industrial policy, 1974 with the objective of facilitating the
transaction of government development bonds and corporate securities. The Nepal Stock
Exchange Limited (abbreviated as NEPSE) is the only Stock Exchange of Nepal. Besides, the
meaning and background of NEPSE this study also involves the various functions performed
by NEPSE like enlisting corporate as well as government securities like shares, preference
shares, development bands, and corporate bands, supervising and regulating its members,
acquiring and following the best modern exchange practice etc.
This study has also listed the members of NEPSE at present not only that it also involves fees
and commission involved in NEPSE and above them all the main highlight of this study is
that it has shown the conditions of NEPSE before and after the devastating earthquake that hit
Nepal in 2015.

3.2 Conclusion
Stock exchanges are voluntary associations of members who come together for the purpose of
buying and selling the securities of the listed companies. Only listed securities are traded in
the exchanges and are bought and sold through auction. Stock exchange facilitates to create
marketability in listed securities. This is done by providing trading facilities and publicity to
volume and prices. Secondary markets trade stocks throughout the world. Virtually all
industrialized countries have at least one national stock market. Shares of domestic companies
or financial institutions typically dominate the trading acting on these markets.

23

NEPSE is the only secondary capital market in Nepal that operates under Securities Act 2006.
NEPSE has brought about a number of changes in order to upgrade itself and provide efficient
and reliable services. The NEPSE has existing authorized capital of Rs 160 million, and paid
up capital of Rs 34.915 million. The Nepal Governments holds major shares (58.66%) of
Nepal Stock Exchange. Other holders of the shares of the exchange are Nepal Rastra
Bank(34.6%), Nepal Industrial Development Corporation (NIDC) (6.12%), and members
with 0.62 members of NEPSE. NEPSE in coordination with Nepal Stock Brokers Association
(NSBA) has set up a mechanism to facilitate buying and selling of shares from outside the
Kathmandu Valley.
This study has come up with the findings like: Nepalese Stock Market starts to attract younger
investors in recent period as the majority of the stock investors are younger. Most of the stock
investors have 1 or 2 accounts with brokerage firms. The proportion of educated investors is
high in the market, most of the self- employed and small investors have strong voice in the
Nepalese stock market. The limited investors use their own skills and analytical power in
investment decision. The most influencing factors for decision making are media and friends.
Thus, Nepalese stock market has started to recognize the impact of intangible information
apart from the usual tangible information impacts. The debt/equity structure and average
pricing method; the political and media coverage; the belief on luck and the financial
education; and the trend analysis are the most important factors that an investor collects the
information and analysis prior to investment decisions.

24