What is NEPSE and How Does It Work?
NEPSE was established in 1993 and is regulated by SEBON. It operates as a fully electronic trading platform.
| Metric | Value |
|---|---|
| Total Listed Companies | 284 |
| Market Capitalization | NPR 4,435,032 million (4.43 trillion) |
| NEPSE Index | 2,641.44 |
| Total Listed Shares | 9,224.46 million |
| Market Cap to GDP Ratio | 72.62% |
| Trading Days | Sunday to Thursday (11 AM - 3 PM) |
NEPSE uses T+2 settlement cycle. Trading hours are 11:00 AM to 3:00 PM, Sunday through Thursday.
Step 1: Open a Bank Account
Currently 54 BFIs operate in Nepal:
| BFI Category | Count | Examples |
|---|---|---|
| Class A (Commercial Banks) | 20 | NABIL, NICA, GBIME, KBL, SBL, NMB |
| Class B (Development Banks) | 17 | MNBBL, SADBL, SHINE, KSBBL |
| Class C (Finance Companies) | 17 | CFCL, GFCL, ICFC, GUFL |
These 54 BFIs operate 6,502 branches, manage 61,851,230 deposit accounts, and serve 29,273,986 mobile banking customers.
Requirements: Citizenship certificate, 2 photos, minimum deposit NPR 100-1,000.
Step 2: Open Demat Account via CDSC (MeroShare)
A Demat account holds your shares electronically. CDSC manages all Demat accounts through MeroShare.
Process
- Visit your bank branch (most banks are DPs for CDSC)
- Fill account opening form with KYC documents
- Submit citizenship certificate, photo, bank details
- Pay annual fee (NPR 25-100)
- Receive your 16-digit BOID (Beneficiary Owner ID)
- Register on meroshare.cdsc.com.np with your BOID
MeroShare provides: portfolio view, IPO applications, share transfer management, transaction history, dividend tracking.
Step 3: Open Broker Account (TMS)
NEPSE has 50 licensed stockbrokers. Register with one to start trading.
Registration Process
- Choose a broker based on location and platform quality
- Submit KYC: citizenship, photo, bank details, BOID number
- Get TMS credentials (client code, username, password)
- Deposit minimum NPR 25,000 as collateral
Step 4: Understanding Trading
Order Types
| Type | Description | Best For |
|---|---|---|
| Market Order | Buy/sell at current price | Quick execution |
| Limit Order | Buy/sell at your specified price | Price-sensitive trades (recommended) |
Transaction Costs
| Cost | Rate | On NPR 100,000 Trade |
|---|---|---|
| Broker Commission | 0.36-0.40% | NPR 360-400 |
| SEBON Fee | 0.015% | NPR 15 |
| DP Charge | NPR 25/script | NPR 25 |
| Capital Gains Tax | 5% on profit | Varies |
| Total | ~0.4% | ~NPR 400 |
Step 5: Understanding Sectors
| Sector | Companies | Market Cap (Rs. Mn) | Share % | YoY |
|---|---|---|---|---|
| Commercial Banks | 19 | 1,056,197 | 24.55% | +0.12% |
| Hydro Power | 91 | 701,003 | 16.29% | -6.15% |
| Insurance | 24 | 616,964 | 14.34% | Mixed |
| Microfinance | 50 | 369,965 | 8.60% | -0.06% |
| Manufacturing | 22 | 224,803 | 5.22% | +33.13% |
| Development Banks | 16 | 197,474 | 4.59% | +3.90% |
| Hotels | 7 | 118,457 | 2.75% | +7.48% |
| Finance Companies | 20 | 93,363 | 2.17% | -16.01% |
Best Sectors for Beginners
- Commercial Banks (Safest): Large-cap, NRB regulated, regular dividends, 24.55% of market cap. Start with NABIL, NICA, GBIME, KBL.
- Mutual Funds (Easiest): Start with NPR 100/unit. Professional management and instant diversification.
- Hydropower (Growth): Nepal has 83,000 MW potential, only 2,800 MW developed. Long-term growth story.
- Development Banks: Outperforming commercial banks (+3.90% vs +0.12% YoY).
How to Evaluate a Stock
| Ratio | What It Means | Good Value |
|---|---|---|
| P/E Ratio | Years of earnings you pay for | Below 20 |
| EPS | Profit per share | Above NPR 20 |
| Book Value | Net asset value per share | Price below BV = undervalued |
| Dividend Yield | Annual dividend as % of price | Above 3% |
| ROE | Return on equity | Above 12% |
| NPL Ratio (banks) | Bad loans percentage | Below 3% |
| Capital Adequacy (banks) | Financial buffer | Above 11% |
IPO Investing: Easiest Entry Point
How to Apply for IPO
- Log in to MeroShare (meroshare.cdsc.com.np)
- Click My ASBA
- Select the IPO company
- Enter units (minimum 10 = NPR 1,000)
- Select bank account for ASBA blocking
- Submit application
- Money is blocked until allotment. If not allotted, money is released back.
Tip: Apply for every IPO as risk is minimal (buy at face value) and listing gain potential is significant.
Building Your First Portfolio
Conservative Portfolio (NPR 100,000)
| Allocation | Sector | Amount | Strategy |
|---|---|---|---|
| 40% | Commercial Banks | NPR 40,000 | 2 large-cap bank stocks for stability |
| 20% | Development Banks | NPR 20,000 | 1-2 dev banks for growth |
| 20% | Hydropower | NPR 20,000 | 1-2 operating hydro stocks |
| 10% | Mutual Funds | NPR 10,000 | Instant diversification |
| 10% | Cash Reserve | NPR 10,000 | For dips and IPOs |
Key Rules
- Start small: NPR 25,000-50,000 to learn
- Diversify across 3-4 sectors minimum
- Invest monthly (SIP approach)
- Think long-term: NEPSE grew 24.6% in 2 years
- Reinvest dividends for compounding
- Avoid margin trading as a beginner
- Learn analysis at nepsetrading.com
Understanding Dividends
| Type | Description | Tax |
|---|---|---|
| Cash Dividend | Cash to your bank account | 5% TDS |
| Stock Dividend (Bonus) | Free additional shares | Taxed when sold |
| Right Shares | Buy more at NPR 100/share | Pay NPR 100 per share |
Example: 20% stock dividend on 100 shares = 20 free shares. Total becomes 120. This is how long-term wealth builds through compounding.
Common Beginner Mistakes
- Following tips blindly: Always research or use data-driven tools like nepsetrading.com
- Panic selling: NEPSE dropped to 1,615 in 2023 but recovered to 2,641 by 2026 (+63%)
- Not diversifying: Never put all money in one stock
- Over-trading: Each trade costs ~0.4%, frequent trading eats profits
- Chasing penny stocks: Cheap does not mean good value
- Margin trading: Borrowing to invest amplifies both gains AND losses
Tax Guide for Stock Investors
| Tax Type | Rate | When Applied |
|---|---|---|
| Capital Gains (Individual) | 5% | On profit when selling |
| Capital Gains (Company) | 7.5% | For institutional investors |
| Dividend Tax (Cash) | 5% TDS | Deducted automatically |
| Bonus Share Tax | None at receipt | Taxed as capital gains when sold |
Essential Tools for Beginners
| Tool | Purpose |
|---|---|
| MeroShare (meroshare.cdsc.com.np) | Demat account, IPO, portfolio |
| TMS (via your broker) | Buy and sell shares |
| nepsetrading.com | AI analysis, screener, smart money signals |
| NRB (nrb.org.np) | Monetary policy, BFI data |
| SEBON (sebon.gov.np) | Regulatory updates, IPO info |
Quick Start Checklist
- Open savings account at any of 54 BFIs (6,502 branches)
- Open Demat account, get 16-digit BOID number
- Register on MeroShare with your BOID
- Register with a licensed stockbroker, get TMS access
- Deposit NPR 25,000+ as broker collateral
- Start with IPO applications (NPR 1,000 minimum)
- Buy 2-3 blue-chip banking stocks as core holdings
- Learn technical and fundamental analysis at nepsetrading.com
- Follow monthly investment plan, think 1-3 years minimum
- Track portfolio on MeroShare, analyze with nepsetrading.com