Recently, there has been a steady increase in public interest in Nepal’s stock market. Observe people in Kathmandu talking about anything; there must be one, two, or more people interested in the stock market. But what exactly is it?
In essence, a share is a piece of a company’s ownership. Therefore, purchasing or selling shares entails acquiring or disposing of a portion of the corporation. You can purchase or sell shares on the stock market, often known as the share market. To raise capital, public corporations typically issue shares to the general public. However, in addition to shares, the stock market also facilitates trading of debentures, bonds, and mutual funds.
We now provide to you the fundamental principles of Nepal’s stock market operation.
Regulator
According to the Securities Act of 2006, the government agency that oversees the stock market is called the Securities Board of Nepal (SEBON). In addition to registering the securities of publicly traded firms, SEBON’s main responsibilities include issuing the required securities regulations and directives as well as regulating and systematising the issuance, transfer, sale, and exchange of the registered securities. Only businesses that have been registered with and given approval by SEBON are permitted to list their shares on these marketplaces.
- Types Of Share Market
The primary market and secondary market are the two different share markets where shares can be traded. In the main market, a company will directly issue shares, debentures or bonds, and mutual funds at a base price. Initial public offering, or IPO, refers to the first time a corporation sells its shares to the general public. Similar to this, a corporation will announce a follow-on public offering, or FPO, if it already has shares listed on the stock market and wishes to issue more. Third, a corporation can issue right shares at the base price for the current owners.
In addition to IPOs, the primary market also offers FPOs, right shares, debentures or bonds, and mutual funds. Companies borrow money from the general public when they issue debentures, which are debt instruments. As the corporation is legally required to pay a fixed payment, typically a higher interest rate than fixed deposits, to such bonds even if they incur losses for at least 7 to 10 years, these securities are considered low-risk in Nepal. Contrarily, mutual funds are collective investment plans run by portfolio management firms that pool investor funds and use them to buy stocks, bonds, and short-term loans.
The shareholders, who are the actual shareowners, have the ability to sell the shares they bought on the primary and secondary markets. The only stock exchange in Nepal is called Nepal Stock Exchange (NEPSE).
- How to Invest in The Share Market ?
We will outline the step-by-step procedure for investing in the stock market so that you can become a shareholder.
- You will first require a bank account, which you can open whenever it’s convenient for you as long as it offers Applications Supported by Blocked Amount (ASBA) service.
- A dematerialized account, also referred to as a demat account, is the second thing you will want. The majority of Nepalese commercial banks offer demat account services. So, you can apply for the demat account that will house your shares provided you have a bank account. In addition, some stockbroker firms offer demat account services. If the company you invested in pays dividends, you will receive that in your Demat account.
Depository participant (DP) holders are any businesses that control your demat account. Your beneficial owner identifier (BOID), which is a special 16-digit identifying number, will be given to you, the beneficial owner (BO), by the DP holder. A DP holder often costs Rs 100 to Rs 150 per year for managing the demat account.
- Obtain the DP owner’s Meroshare login information. For the credentials, you will need to fill out a new form. Additionally, the DP holder will provide you your customer reference number (CRN), which you will also need. Once you have it, you can use this page to log into the Meroshare platform.
- You can start investing in the primary market as soon as you can log in to the Meroshare via the web portal. You will have to wait for any IPOs, FPOs, openings of mutual funds, debentures, or bonds to do that. Various news portals can be used to search for openings, but be sure they update often.
How to Operate MeroShare Account?
- You must first input your login information, which consists of your password, user ID, and DP holder.
- Once you log in, your dashboard will appear. You can now view the values of your shares, the opening and closing dates of IPOs and FPOs, and other fundamental information.
- You must visit My ASBA on the menu bar in order to apply for any of the jobs. There, you can get comprehensive information on the positions that are being offered. Open the IPOs/FPO details on the page, select the “Apply for Issue” option, input the quantity of shares you want to purchase, enter your CRN number, and submit your application for the shares.
- The business issuing the IPOs/FPOs may reopen or extend their closing date if the openings are not fully subscribed. However, shares will be distributed through a lottery if such openings are oversubscribed, that is, if there are more applications than there are available spaces.
How to Buy and Sells in Secondary Market?
As banks no longer offer such services, if you want to trade shares on the secondary market, you will need to have a broker account from a registered broker organisation. Following registration, you have two choices:
- You can get login information for the NEPSE Trade Management System portal so that you can transact directly in shares there. Also available online are cash transactions.
- You can choose offline transactions, but you must either be present in person or speak to brokers on the phone to make your desired transactions. You must produce an account payee check in the broker company’s name for this.
How To Make Money with Shares?
Either actively or passively, you can earn money. You can actively participate in both the primary and secondary markets. Shares may be purchased on the secondary market, accrue dividends and bonuses, and then be sold at a profit. You can make passive income by purchasing shares on the primary and secondary markets and taking advantage of the dividends and bonuses that firms share from their profits.
However, you need to be aware that investments are vulnerable to market dangers. Therefore, before making an investment, it is advisable that you thoroughly study all the documentation, consider the company ratings, and evaluate your risks.
Conclusion
Stock market is not only for the people who have the account or finance background. This market is for everyone with very less amount and knowledge but once you start investing you have to be very informative. As per many data, stock market is better than real state or any market.