Stock is the ownership certificates of any company. It represents a claim on the company's assets and earnings. As you acquire more shares, your ownership stake in the company becomes greater.
Stocks can be categorized into two main groups:
- Common stock — Common stocks are securities that represent ownership in a company. Common stockholders are towards the bottom of the ownership pillar. In the case of unforeseen events, or liquidation, common stockholders can access assets only after all liabilities are settled.
- Preferred stock — Preferred stocks are usually greater compared to common stock. With preferred stock, you can expect the dividends regularly, but not in the case of common stocks. However, unlike common stock, you do not have voting rights.
A Stock Market is an organized place where stocks, bonds, or other securities are traded.
Types of stock market
- Primary Market
In the primary market, investors buy securities directly from the company issuing them.
- Secondary market
In the secondary market, investors trade securities among themselves, and the company with the security being traded does not participate in the transaction.
Nepal stock Exchange (NEPSE) is the organization responsible for the operation of the stock market in Nepal. It is the only stock exchange of Nepal. NEPSE operates on the ‘NEPSE Automated Trading System ‘(NATS), a fully screen based automated trading system, which adopts the principle of an order driven market. Purchase & Sell of Physical as well as dematerialized securities is done through NATS.
Nepal stock exchange at the end of the day published the transaction index which is called NEPSE index.
Market capitalization refers the total market value of a company's outstanding shares. It is calculated by multiplying a company's shares outstanding by the current market price of one share.
Market participants of the Nepalese stock market are:
- Investors It refers to the stockholders or potential stock buyers.
- Clearing house It refers to the CDSC Ltd. (Centralized Depository System and clearing). It is responsible for settlement of fund and securities.
- Depository Participants It helps to hold share in electronic form.
A stockbroker is an individual / organization who are specially given license to participate in the securities market on behalf of clients. In Nepal there are 50 registered stock brokers.
Brokerage charge for the purchase or sale of the share:
|1||Up to Rs 50,000||0.6|
|2||Rs 50,000 to 5,00,000 ||0.55|
|3||Rs 5,00,000 to 2 million||0.50|
|4||Rs 2 million to 10 million||0.45|
|5||Over 10 million||0.40|
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.
For regular trading
Sunday to Thursday
Market Open: - 11:00 AM Market Close: - 15:00 PM
For Odd Lot Trading (Trading of less than 10 shares)
Market Open: - 11:00 AM Market Close: - 15:00 PM
Index-based Circuit Breakers
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. 12:00 PM. In case this movement takes after 12:00 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 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 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.
Securities and Exchange Board of Nepal (SEBON)
The SEBON is the statutory body entrusted with the task of regulating the Securities Market in 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.For the purpose of carrying out its objects the SEBON grants licenses to the Stock Exchange, Stock Brokers, Merchant Banks, Mutual fund and Depository participants.
SEBON fee while purchase or sale of share
Fee to SEBON is fixed 0.015% of transaction amount.
How to buy & sell shares in Nepal?
You have to follow few basic steps:
Capital Gain tax
Capital Gain Tax is fixed 5% on Net Profit for individual and 10% for Institutional Investors; this tax is levied only if seller makes profit from security transaction.
DP charge is Rs 25 for every transaction.
If you purchase 50 share of a company @ Rs. 900. Then you have to pay Rs. 45,301.75.
|Total Amount (50* 900)||45,000|
|Broker Commission (45,000*0.6%)||270|
|SEBON Fee (45,000*0.015%)||7.75|
|Total Amount Payable||45,301.75|
Similarly if you sell 50 share of NIC ASIA Bank @ Rs 1500 which was purchased on Rs. 900 then you will received Rs. 73,087.53.
|Total Amount (50* 900)||75,000.00|
|Broker Commission (45,000*0.6%)||412.50|
|Capital Gain Tax||1,463.73|
|SEBON Fee (45,000*0.015%)||11.25|
|Total Amount Payable||73,087.53|