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The number of investors in the stock market of Nepal has been increasing immensely. Within one year, the number of IPO applicants has almost tripled in number.

However, most of the new investors only seem to be active in the primary market of Nepal. It means that they only know how to apply for an IPO (Initial Public Offering). Most of them have no idea of how to invest in the secondary market of Nepal. I have gotten many questions from friends and other people regarding how they can invest in the secondary market. I wish to help them through this article.

Before I begin, you should know the basics of the stock market. I have written a few articles previously on this topic. If you haven’t checked them out, you probably should. It will give you the idea of the following:

• What is the stock market?
• How does it work?
• How to start investing in the stock market?
• A brief history of the stock market.
• A few essential points to know before you invest.

If you are already aware of these things, you can skip reading the previous articles.

Here are the links to my previous articles:

1. Stock Market 101 – How to Start Investing in the Stock Market of Nepal?
2. 10 Things You Should Know About the Stock Market of Nepal

The Secondary Stock Market of Nepal

I have briefly discussed the secondary stock market and the steps to invest in this market in the previous articles (no. 2). In this article, I will talk about it in more detail.

Firstly, what is the secondary market? It is the market where investors can trade shares of companies listed on the Nepal Stock Exchange (NEPSE). When you first buy stocks in the primary market through an IPO, the shares are not listed on NEPSE. It is only after the allotment process that the shares get listed.

Once the shares are listed, and the first trade takes place, a new price is set for that particular stock.

So when a buyer agrees to purchase the stock at a certain price that the seller has asked for, that price becomes the LTP (Last Traded Price) of the stock (Supply and Demand, as explained in detail in article no. 1). If you want to buy that stock, you will have to set a price close to the LTP. The LTP at the end of the market time will be the closing price of the stock for that day.

What You Need to Invest in the Secondary Market of Nepal

Although this has already been discussed in my previous post, I’m going to share it again because you must have these things to invest in the secondary market.

1. Demat Account

If you have invested in IPOs, you probably have a Demat account in your name. A Demat account is an account to store your shares, just like a bank account stores your money. It is compulsory to have a Demat account to invest in the stock market. To open a Demat account, you can go to any of the companies licensed by SEBON as a Depository Participant (DP). Usually, banks, merchant banks, and stockbrokers are licensed to open a Demat account for their clients. These companies will take a certain fee for opening your Demat account. Then, the DP will provide you with your Demat account number (also known as BOID) and MeroShare credentials.

2. MeroShare Account

A MeroShare account is an account that gives you access to your shares electronically. This account allows you to view the details of your shareholdings and the current value of your portfolio. Furthermore, it also gives access to your transaction history and your purchase sources. Applying IPOs, FPOs, right shares, etc., can also be done through your MeroShare account. Your MeroShare account is usually opened along with your Demat account if you specify it clearly while filling up the form for your Demat account. To access your MeroShare account, you have to go to https://meroshare.cdsc.com.np/ and log in with the credentials provided by your DP.

3. Stockbroker/Trading Account

If you want to buy/sell shares in the secondary market, you need a stockbroker account. A stockbroker buys and sells shares on behalf of clients. There are currently about 50 stockbrokers in Nepal. You can find the appropriate stockbroker and open an account with them. Some stockbrokers are licensed as DP, which means you can open your Demat account, MeroShare account, and stockbroker account all at the same place.

A trading account gives you access to an online system known as the Trade Management System (TMS), where you can place your buy/sell orders yourself. You will not need to call your broker to place the order. Further, you can also open your trading account at the stockbroker’s office itself. Your stockbroker will provide you with the process and other details necessary for the trading account. Stockbrokers usually ask for collateral when you open a trading account with them. Collateral is an assurance amount (either in cash or cheque) that allows you to purchase shares worth four times the amount you have provided as collateral to the broker. For example, if you want to purchase shares worth Rs. 1,00,000 through the trading account, you will have to provide a collateral amount of Rs. 25,000 to the broker.

(It is better to call the stockbroker and ask them about the process of opening stockbroker and trading accounts. Different brokers have different ways to do so. Some allow you to open a trading account online, while others ask you to visit their office and submit the documents. Usually, the documents required are a KYC form, a Citizenship copy, a DP confirmation letter, a TMS agreement form, and a cheque for collateral. The documents will also be available on the broker’s website.)

4. Bank Account

It is quite obvious that you need money to buy shares. Therefore, you must link your bank account with your Demat account, MeroShare account, and stockbroker account. If you purchase an IPO, the amount will be automatically deducted from your bank account, which you have linked with your Demat/MeroShare account. In the secondary market, however, you can pay your broker from any of your bank accounts. A bank account is also required when you receive cash dividends. The dividend amount will be automatically credited to your respective bank account.

How To Invest In The Secondary Stock Market of Nepal?

Follow these steps to start investing in the secondary market of Nepal.

1. Pick a stock

The first thing you need to do is pick a stock that you are interested in buying or selling. Then, you need to find out the current trading price of that stock. You can do that in the market depth section of the NESPE website or that of the TMS. You can also see the number of stock orders (quantity) that the buyers and sellers place for that particular stock.

2. Decide the Price and Quantity

After picking your stock, you must also decide how much of that stock you want to buy and at what price. Before you place your order, you have to be clear about the price and quantity. It is for both buy and sell. In the case of selling, you need the shares in your Demat account before you sell them. Otherwise, it will not be a valid order.

3. Place the Order (Use Any One of These)

a) Offline Order

There are two different ways you can invest in the secondary market – online and offline. The offline method is where you call your stockbroker to place your orders to make the transaction.

After you have picked your desired stock and decided the price/quantity, you have to call your stockbroker and ask them to place the order for you. Make sure that you set your price by looking at the LTP and the buy/sell prices in the market depth. By doing this, you will have a high chance of making your transaction happen. If your transaction does not happen during the day, your order will be canceled, and you will have to place a new order again the next trading day.

Your broker will inform you via text message/phone call/email at the end of the working day if the transaction takes place. You can also check this through the TMS if you are trading online.

b) Online Order

The online method is where you place the buy/sell order by yourself through TMS. Make sure that you have opened a TMS account and it is activated. In order to purchase shares, you must have submitted the collateral amount to your broker. You do not need collateral to sell shares.

You can also view the market depth from your TMS account.

To place your buy/sell order through TMS, you need to know how to use the system. You can learn it in this video in detail.

4. EDIS (Only Required for SELL)

EDIS stands for Electronic Deposit Instruction Slip. You use it to transfer the shares in your Demat account to the broker’s account. EDIS is only necessary when you sell your shares. You don’t have to use EDIS when you buy shares.

Share transfer using EDIS is done through your MeroShare account. So, you need to follow certain steps inside your MeroShare account to complete the share transfer process. Watch this video to understand the entire process in detail.

5. Final Steps

BUY: If you had bought shares, you would have to pay your broker within a few days. You can do so either by submitting a cheque or through an online medium like ConnectIPS. The broker will credit the shares to your Demat account within 5-7 days of the transaction if you have paid them in time. If that does not happen, call the broker.

SELL: If you had sold shares, first, you need to transfer the shares from your Demat account to the broker’s account through EDIS. Then, you can collect your cheque from the broker within 5-7 days of the transaction. You can also ask them to pay you via ConnectIPS.

In Conclusion

I hope this article was helpful to those who were in doubt about the process of investing in the secondary market of Nepal. Make sure you have watched the two videos I have recommended in this article. The process of investing in the secondary market is not as complicated as it seems, especially now that there is an online system. But remember, as I have said in my previous article, I highly recommend you study the company properly before you purchase the shares in the secondary market, especially if you are a new investor.

Summary

How To Invest In The Secondary Stock Market of Nepal?

1. Requirements: Demat account, Mero share account, stockbroker/trading account, and bank account
2. Pick a stock
3. Decide the price and quantity
4. Place the order
5. EDIS (for sell)

Frequently Asked Questions (FAQs)

1. How many stock markets are there in Nepal?

Currently, there is only one stock market in Nepal. It’s the Nepal Stock Exchange (NEPSE).

2. How can I invest in the Nepal stock market?

To invest in the primary stock market of Nepal, you need a Demat account, Meroshare account, and a bank account. You can invest in IPOs and FPOs from your Meroshare account.

To invest in the secondary stock market of Nepal, you will also need a stockbroker/trading account. You can use the online trading system (TMS) or invest in stocks offline by calling/visiting the stockbroker’s office. The details have been explained in the above article.

3. How can I learn about the Nepal stock market?

You can learn about the Nepal stock market for free online from different blogs and Youtube channels. Furthermore, you can also take share training in Nepal. However, the most convenient way to learn about the stock market is to start investing. You don’t have to invest large sums of money. Instead, you can start with small investments (Rs. 5,000 to 10,000) and learn how the market works first. Lastly, you must always remain informed about the market by reading news about companies and market trends.

The post How To Invest In the Stock Market of Nepal: A Guide To Investing In The Secondary Market appeared first on Biliz Maharjan.

Nepal Stock Exchange (NEPSE) is the only stock exchange in Nepal. The number of investors in the stock market of Nepal has been increasing in the past months. From experienced investors to newbies, everyone has the same purpose for investing in stocks – to make money.

Investing in stocks is a good way to make some money. You can earn passive income by investing in stocks. A passive income is an income generated from a source where one does not have to be actively involved every time. How is investing in stocks a passive income? Because after you invest your money in stocks, you will receive dividends as income from your investments.

If you are a newbie in the stock market, you should first understand what stocks are and how the stock market works. You can learn about it in my previous article on the stock market.




The stock market of Nepal is at its growing stage. As of writing this post, the index of the market is at 1,645.67. I will be discussing the 10 things you should know about the stock market of Nepal in this post. So, let us begin.

If you are already involved in the market and are an active investor, the following might not be new things for you. But I assure you that they can add some value to your knowledge of the stock market.

1. Establishment and Early Days

The Nepal Stock Exchange (NEPSE) was established in the year 1993 AD (2050 BS). But, it opened its trading floor only on 13th January 1994. The first companies to be listed on NEPSE were Biratnagar Jute Mills Ltd. and Nepal Bank Ltd. In the early days, trading of securities took place through an open cry-out system. Trading through computers began in 2063 BS.

2. Structure

NEPSE has a paid-up capital of NRs.50,00,00,000. The shareholders of NEPSE include the Government of Nepal, Nepal Rastra Bank, Employees Provident Fund, Rastriya Banijya Bank (former, Nepal Industrial Development Corporation), Laxmi Bank Ltd., Prabhu Bank Ltd., and other securities businessperson (brokers). The detailed structure is shown below.

(Source: Nepal Stock Exchange Ltd.)

3. Securities Board of Nepal (SEBON)

The Securities Board of Nepal (SEBON) was established by the Government of Nepal on June 7, 1993, as an apex regulator of Securities Markets. It has been regulating the market under the Securities Act, 2006. The major functions and duties of SEBON include; issue necessary securities regulations and directives; share registration of public companies; issue license to operate stock exchange; regulate and systematize the issue, transfer, sale, and exchange of registered securities;  issue license to stockbrokers, dealers, merchant bankers, and fund managers; issue license to depository company, depository participant, and credit rating agency; and more.

4. Primary and Secondary Markets

a) Primary Market

A primary market is a market where investors can buy the stocks of a company when it is issued in the market for the first time. The companies issue stocks primarily through an IPO (Initial Public Offering). The public will be able to invest in the shares of the companies by applying for the IPO. The process of applying for an IPO is explained in point number 6 below. Investors can apply for an IPO and buy the shares of the company at a base price (which is usually Rs. 100 per share for companies in Nepal).

The public can also invest in the primary market through FPOs (Follow-on Public Offerings) – a process by which a company, which is already listed on the Nepal Stock Exchange, issues new shares to the public. Both new investors and current shareholders can invest in the FPO of a company.

b) Secondary Market

The secondary market is where investors can trade (buy/sell) the stocks of companies that are already listed in NEPSE. To buy/sell a stock in the secondary market, an investor has to pay the price at which the company is currently trading in the market. The process of investing in the secondary market is explained in point number 7 below.

5. Requirements to Invest in the Stock Market of Nepal

There are several things necessary to start investing in the stock market of Nepal. You must ensure that you have all these things ready before you begin investing. The following are requirements to invest in the stock market of Nepal.

• Demat Account
• MeroShare Account
• Stockbroker/Trading Account
• Bank Account

a) Demat Account

A Demat account is an account to store your shares, just like a bank account is an account to store your money. It is compulsory to have a Demat account for you to invest in the stock market. To open a Demat account, you can go to any of the companies that are licensed by SEBON as a Depository Participant (DP). Usually, banks, merchant banks, and stockbrokers are licensed to open a Demat account for their clients. These companies will take a certain fee for opening your Demat account. The DP will provide you with your Demat account number (also known as BOID) and MeroShare credentials.

b) MeroShare Account

A MeroShare account is an account that gives you access to your shares electronically. This account allows you to view the details of your shareholdings and the current value of your portfolio. Furthermore, it also gives access to your transaction history and your purchase sources. The application of IPOs, FPOs, right shares, etc. can also be done through your MeroShare account. Your MeroShare account is usually opened along with your Demat account if you specify it clearly while filling up the form for your Demat account. To access your MeroShare account, you have to go to https://meroshare.cdsc.com.np/ and log in with the credentials provided by your DP.

c) Stockbroker/Trading Account

If you want to buy/sell shares in the secondary market, you need a stockbroker account. A stockbroker buys and sells shares on behalf of clients. There are currently about 50 stockbrokers in Nepal. You can find the appropriate stockbroker and open an account with them. Some stockbrokers are licensed as DP as well, which means you can open your Demat account, MeroShare account, and stockbroker account all at the same place.

A trading account gives you access to an online system, known as the Trade Management System (TMS), where you can place your buy/sell orders yourself. You will not need to call your broker to place the order. You can open your trading account at the stockbroker’s office itself. Your stockbroker will provide you with the process and other details necessary for the trading account. Stockbrokers usually ask for collateral when you open a trading account with them. Collateral is basically an assurance amount (either in cash or cheque) that allows you to purchase shares worth four times the amount you have provided as collateral to the broker. For example, if you want to purchase shares worth Rs. 1,00,000 through the trading account, you will have to provide a collateral amount of Rs. 25,000 to the broker.

d) Bank Account

It is quite obvious that you need money to buy shares. A bank account will be linked with your Demat account, MeroShare account, and stockbroker account. If you are purchasing an IPO, the amount will be automatically deducted from your bank account, which you have linked with your Demat/MeroShare account. In the secondary market, however, you can pay your broker from any of your bank accounts. A bank account is also required when you receive cash dividends. The dividend amount will be automatically credited to your respective bank account.

6. Investing in the Primary Market

To invest in the primary market, first, you must have fulfilled all the requirements listed in point number 5 (except stock broker/trading account). Most of the new investors do not know how to apply for an IPO in the stock market of Nepal. In the early days, people had to fill up forms and apply for IPOs by visiting the issue-managing companies. Thankfully, we have an easy way to apply for IPOs now. However, here you need an additional requirement – CRN Number. You can receive your CRN number by filling up a C-ASBA form at your bank (Remember: Your CRN number is provided by the bank, not your DP. Also, the bank must be the same one which you have registered in your Demat Account). Here are the steps to apply for an IPO in the primary market.

• Step 1: You must have the following – Demat Account, MeroShare Account, and CRN Number.
• Step 2: Log in to your MeroShare Account by going to the link provided above in point number 5 (b).
• Step 3: Go to My ASBA > Select Apply for Issue > Select which issue you want to apply for.
• Step 4: Fill up the details including how many units you want to apply, the bank from which you want to debit the amount, and provide your CRN Number.
• Step 5: Confirm the details by providing the Transaction PIN. (You must set up your transaction PIN when you first log in to your MeroShare account).
• Step 6: It’s done! You can check your application details by going to the Application Report section of My ASBA.

7. Investing in the Secondary Market

To invest in the secondary market, you will need all the requirements listed above in point number 5. The first step to investing in the secondary market is that you must be aware of the market. You must know how the market works and how the prices of stocks are determined. You must also be aware of the current stock trading prices. These are provided on the official website of NEPSE in the Stocklive section or the Marketdepth section. Here are the basic steps to invest in the secondary market.

1. Decide which company’s stock you want to buy and how many units you want to buy.
2. Check the current trading price of the company.
3. Place a buy order either through TMS or by calling your broker and asking them to place the order for you.
4. Your broker will notify you via call/text/email when your order has been executed.
5. Pay the money to your broker and get the shares in your Demat account.

The process is similar if you want to sell your shares.

(It is highly recommended to study a company properly before you purchase its shares in the secondary market, especially if you are a new investor.)

8. Market Timings

The Nepal stock market (NEPSE) opens at 11:00 a.m. and closes at 3:00 p.m. from Sunday to Thursday. On Fridays, the market opens at 11:00 a.m. and closes at 1:00 p.m. (Updated: 15 June 2022)

9. Circuit Breakers and Price Range

Circuit-breaker points represent the thresholds at which trading is halted market-wide for single-day gains/declines in the NEPSE index. Circuit-breakers are applicable in three stages – when the market gains/declines by 4%, 5%, and 6%.

• If the market gains/declines by 4% in the first hour of market opening (i.e. from 11:00 am to 12:00 pm), the trading will be halted for 20 minutes.
• If the market gains/declines by 5% in the second hour of market opening (i.e. from 12:00 pm to 1:00 pm), the trading will be halted for 40 minutes.
• And, if the market gains/declines by 6% at any point, the trading will be halted for the rest of the day and the market will be closed instantly.

Price Range applies to individual companies listed in NEPSE. The circuit breaker for individual companies applies at a 10% price movement upward or downward. The trading will be halted for the company’s stock at a price higher or lower than 10% of the last traded price.

10. Fees, Commissions, and Tax

Investors have to pay certain fees and commissions to brokers and regulatory bodies when trading shares. Below are the details.

• Broker commission: 0.4% to 0.6% per transaction amount (Update: It has been reduced to 0.27% to 0.40%)
• DP Charge: Rs. 25 per company
• SEBON fee: 0.015% of the transaction amount
• Capital Gain Tax (CGT) for individual investors: (Updated: July 16, 2021)
  • 7.5% of Net Profit with a holding period of fewer than 365 days
  • 5% of Net Profit with a holding period longer than 365 days
• Tax on cash dividend: 5%
• Tax on bonus shares: 5% on par value

These were the 10 things you might or might not have known about the stock market of Nepal. I hope this article was insightful. You can share your thoughts and queries in the comments section below or you can write to me personally if you want to know more about the stock market of Nepal.

Like I said, investing in stocks can be a good way to make money. But it can also lead you to lose your money if not done with proper information. I advise you to gain as much knowledge as you can on the stock market before you start investing. The more you learn, the more you will be able to earn. So make your decisions wisely and seek help from the people who know about investing in the stock market. Lastly, have fun with investing because it’s not just about making money, it is also about enjoying the process.

The post 10 Things You Should Know About the Stock Market of Nepal appeared first on Biliz Maharjan.

When we think about the stock market, we usually have images of people looking at big screens, talking on the telephone, yelling numbers. You might have seen such images in the movies as well. I used to think the same way.

When I first got into the stock market, I had a lot of questions. 

• How does the market work? 
• How do investors buy/sell stocks? 
• Where do I go to buy stocks? 
• How much money do I need to invest in the stock market? What defines the price of stocks? 

These were some of the questions I wish I had answers to. Through this article, I would like to answer some of the basic questions related to the stock market. This article is only for beginners, for those who want to start investing in the stock market but lack basic knowledge about it.

What is the Stock Market?

Before saying anything about the stock market, let me first tell you what a stock means? A stock is part ownership of a publicly listed company. It is a small portion of the company that the stockholder owns. 

The term stock is used interchangeably with share. However, there is a slight difference between the two. But for now, let’s not get into the difference in detail. A stock market is a place where the stocks get exchanged. A seller and a buyer come together to make the exchange.

How Does the Stock Market Work?

To understand this, you will have to recall the first chapter of Economics – Demand and Supply. Now for those who have never studied demand and supply, here’s what it means: The basic theory of demand and supply explains how the price of a product is determined by the availability of a product (supply) and the desire to purchase the product (demand). 

The relationship between demand (D) and supply (S) is shown in the following diagram.

This diagram shows that the price is determined by the intersection of demand and supply curves. Studying the diagram further (see below), the price increases in two scenarios – when the demand increases (demand curve shifts towards the right) or when the supply decreases (supply curve shifts towards the left).

So basically, there are four takeaways from the theory of demand and supply.

1. When demand increases, price increases.
2. When supply increases, price decreases.
3. When demand decreases, price decreases.
4. When supply decreases, price increases.

The stock market works in the same way. When the demand for a stock increases, the price of the stock increases. In other words, if there is a high number of buyers of a particular stock, the price of the stock increases. Similarly, when the supply increases, price decreases. In other words, if there is a high number of sellers of a particular stock, the stock price decreases. So your number one rule in the stock market should be to buy when the price of a stock is low and sell when its price is high.

Nepal Stock Exchange (NEPSE)

The Nepal Stock Exchange (NEPSE) is the only stock exchange in Nepal. NEPSE lists stocks of public companies, which are the companies whose stocks can be purchased or sold publicly. It provides information about the stock market in Nepal. You can know about the prices of stocks and the current trading situation on NEPSE’s website. The stock market of Nepal opens from 11:00 am to 3:00 pm. Investors can only buy and sell stocks during this time of the day. The market opens five days a week, from Sunday to Thursday.

How to Start Investing in Stocks?

It is the most common question in the mind of a beginner investor. There are two ways to invest in stocks—through the primary or secondary markets. What is the primary market? When a company first lists its shares publicly, investors buy the shares in the primary market. This process is called Initial Public Offering (IPO). When you purchase the stock through an IPO, you have purchased it in the primary market. A secondary market is where investors buy/sell shares of already-listed companies.

To start investing in the stock market in Nepal, you will need a few things. At first, you will need a Demat account. This account is for holding all your shares together in an electronic form. It has been made compulsory by the Security Exchange Board of Nepal (SEBON). To open a Demat account, you have to go to a company that is a depository participant. Companies such as investment banks, stockbrokers, and merchant banks provide services to depository participants. If you do not know where to find them, go to your bank and tell them that you want to open a Demat account. They will guide you further.

Secondly, you will need a broker account. Stockbrokers bring buyers and sellers together. If you want to buy the stocks of a company, you do not have to find a seller yourself. Your stockbroker does that for you. In return, the broker takes a commission fee, which is usually a tiny portion of the transaction amount. There are about 50 stockbrokers in Nepal. You can choose any one of them and open an account. Once you open a broker account, now you can begin investing. If you want to buy a stock, place a buy order with your broker, and they will buy the stock for you. In addition, you can ask your broker regarding other processes of buying and selling stocks.

Lastly, you need a bank account for all your transactions. It will be linked with your Demat and broker accounts. The bank account is also necessary to receive the dividends distributed by the companies whose stocks you own.

Before You Begin

Before you begin investing, you must know the company whose stock you are purchasing. Study the company properly before you invest in its stocks. You must also know about the current market condition.

The market condition, in a simple way, can be known by the NEPSE Index. The index measures the stock market performance. The index value keeps on changing every day according to the performance of the stocks in the market. If the index value increases, the market is performing well. If it decreases, the market is performing not-so-well. However, a single day’s index value does not determine the performance of the market. You must monitor the market’s performance by comparing it to its past index values.

As I said, this article was only meant for beginners in the stock market. Now, you must have gotten a brief idea about the stock market and how you can invest in the market. I will write about the analysis of companies in my future posts.

Investing in stocks is a great way to increase your net worth. However, do not expect to make quick money in the stock market. You must always look for ways to increase your knowledge about investing in the stock market. To do so, I suggest you read books, articles, papers and watch videos related to them. The more you know, the better you will be at investing. So, keep learning. That is all that you need to do, especially when you are first starting.

Related:

• Why You Should Consider Investing in Stocks
• 10 Things You Should Know About the Stock Market of Nepal

The post Stock Market 101 – How to Start Investing in the Stock Market of Nepal? appeared first on Biliz Maharjan.