Recently Nepalese share market is all-time high in both Nepal Stock Exchange (NEPSE) index and the daily traded amount. This is the era of new technology and people are seeking different areas of investment. People invest their money with aiming to get a handsome return.
Currently, there is a lot of new investors are in the Nepalese stock market and many people want to enter as well. The Nepalese share market can be a good milestone to earn the money for beginners as well. So, there are a couple of steps new investor should follow before entering into the Nepalese share market:
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Gather information and learn basic about the stock market:
Before starting anything try to gather information from different sources, watch different videos related to the share market, join a different forum related to sharing market, talk with people about the stock market and get overall information about the Nepalese Stock Market.
There are many basic terms like EPS, P/E ratio, bonus share and Cash Dividend, right share, stock split, book closure date; so try to gather basic knowledge about those terms. The basic information will motivate beginners to learn more and dedicated.
Opening the bank account(saving account) and DEMAT (Dematerialized Account) is the first official step to enter into the share market. With bank account numbers and DEMAT numbers, people can apply share through C-ASBA (Centralised Application Supported by Blocked Amount) form.
Recently, the stock market of Nepal has launched the application ‘MERO SHARE’. Mero Share account can create almost in all ‘A’ and ‘B’ level bank. People should open the mero share account where they have their bank account because mero share and bank account interlink together.
Start Participation In Primary Market:
The market where the company first time issues its shares to the general public is the primary market. The primary market is the best market to enter into the share market. Low risk and high return is the main feature of the primary market. When a company wants to issue a certain percentage of share to the general public then they have to issue IPO (initial public Offering) to the general public.
They issue their IPO share in face value amount. Normally, most of the stock’s face value in Nepal is Rs 100. Now, people can apply for IPO through C-ASBA or through Mero Share. For C-ASBA people have to visit the bank, but IPO can apply from home through Mero Share.
To apply through mero share, an investor should have their mero share account and CRN (Customer Relationship Number). Both Mero Share user id and CRN can get from the bank after filling the form as per bank requirements. Nowadays, More than 70% of people apply through Mero Share.
For example: recently Syngati Hydro Electricity Limited (SHEL) issued IPO with Rs 100 per share and later when it was listed in NEPSE it was reached up to Rs 529.
After participating in the primary market investors can get different information about different companies. So participation in the primary market is like opening doors for real market trading.
Enter into Secondary Market:
The market where existing shares are traded between buyer and seller in the secondary market. This is a real market where real traders are traded stocks every day. The secondary market highly risks comparing with the primary market. To enter into the secondary market, the first investor should open their broker account in a broker firm.
After opening the broker account you can sell the share that you buy from the primary market as well. There is a lot of buyer and seller in the secondary market. The secondary market is a risky market as well so here, you have to invest after doing a lot of technical and fundamental analysis about the company.
If investors select a good company then the company will give a good return to investors in long run. Normally, there is much blue-chip company in Nepal that gives a good return to the investor.
So, the secondary market is good for long-term investment. Recently, almost all broker has their online TMS (Trade Management System) so the investor can buy and sell their stock from home. To operate online the investor should deposit a certain amount as a collateral deposit in the broker’s account then the broker gives access to buying stocks however, just to sell the IPO investor does not need to deposit collateral amount.
In Nepal, capital gain tax is 5% which means when an investor sells their stock and if they make the profit then they have to pay tax to the government from their actual profit which is capital gain.
Learn More and be Informative:
Opening all the necessary accounts, knowing the basic term about the stock market, and entering into the secondary market is not enough to make a profit. The secondary market is too much volatile and the market price fluctuates as per the company’s information.
The bad news about the company will go the market price down and vice-versa. Issuing the right share, the announcement of a good dividend and bonus, merger and acquisition, increment in the company’s profit always fluctuate the stock’s market price.
So, always try to get the right information from authentic sources because there are many websites and other social media which spread the wrong information just to fluctuate the price according to their favor. Therefore, filtering the right information is necessary for the secondary market.
There is no fixed amount to enter into the secondary market. For beginners, it’s safe to invest in the banking sector because they a lower market price and they are giving good returns to investors every year. As well as there are many professional licensed Portfolio Management Companies that help the investor to make the portfolio, and provide information about the company as per your profit expectation and risk appetite capacity.
In conclusion, learning is a continuous process in the stock market. Every day and every minute investors need to focus on different sources of information. The major source of information is NRB official website, Securities Board of Nepal, Nepal Stock Exchange, and Rashtriya Beema Sansthan.
Moreover, there are many other websites which provide different fundamental and technical analysis about the company. Sharesansar, Merolagani are some good websites from where investors can get information.