If you haven’t yet entered the Nepali capital market and wish to take advantage of the market’s benefits, the key facts listed below should help you get started.
1. Start by opening a DEMAT account
To engage in both the main and secondary markets, you must first open a dematerialized (DEMAT) account with a Depositary Participant (DP) licenced by the Central Depository System and Clearing Limited (CDSC). Such services are available from most commercial banks, merchant bankers, and stock brokers. If you already have stocks in your name, you can instruct your DP to convert your physical share certificates to dematerialized shares. The DEMAT account works in the same way as a bank account, debiting and crediting the shares you sell and buy. The majority of DPs also allow clients to check the status of their DEMAT accounts online.
2. Be aware of the market
To begin investing in the stock market, you must first grasp how the market works. The Securities Board of Nepal (www.sebon.gov.np), the country’s single capital market regulator, is a good place to start seeking primary data. Its website, among other things, provides information on securities regulations, investor education, and impending public offerings. Similarly, the Nepal Stock Exchange (www.nepalstock.com) is the country’s only secondary market, and its mobile-based application is a wonderful way to access real-time data. Many other famous websites, such as Share Sansar and Mero Lagani, provide daily information on the capital market. Additionally, daily national newspapers, merchant banker websites, and a credit rating organisation – icranepal.com – all provide useful information.
3. Participate in Primary Market by Applying IPO
Applying for primary offers in the primary market, such as an Initial Public Offering (IPO) or a Further Public Offering (FPO), is one of the finest ways to participate in the capital market (FPO). The majority of corporations sell main issues to the general public at NPR 100 per stock face value or at a premium based on their valuations. When you buy in the primary market, the risk is smaller since you have the option to buy shares at a cheaper price than when you buy them in the secondary market after they are listed. Look for opportunities to participate in the initial public offering (IPO) of mutual fund schemes, which can be a good place to start.
News regarding major problems is frequently published in national newspapers and widely broadcast on other media platforms. Once you’ve determined that the key difficulties have been resolved, you can study their prospectus to learn more about them, including historical and anticipated performance, management, and other details. Before making an investment decision, you can check their credit rating with a licenced credit rating firm.
4. Get Involved in the Secondary Market. The first step is to open a Trading Account with your stock broker
All equities traded on the primary market are listed on the secondary market, the Nepal Stock Exchange (NEPSE), which currently has 231 businesses listed. The secondary market is a marketplace where you can sell your existing shares or buy new ones. The value of the NEPSE Index and the share prices of these listed firms fluctuate every day based on the total demand and supply of shares in the market.
You’ll need to open a transaction account with a stock broker’s office if you want to participate in the secondary market. NEPSE presently licences 50 stock brokers, and there are a few stock broker offices outside of Kathmandu. When you register an account with a stock broker, they will provide you a unique ID code that will be used to perform any transactions in your name.
To place a purchase or sale order with your stock broker, simply contact or visit their office. Before placing a sale order with your stock broker, make sure you have the shares in your DMAT account. A commission is charged by the stock broker as a brokerage fee for each transaction, and you must also pay a capital gain tax of 5% if you sell your shares.
5. Still Confused? Seek Professional Advice and Help
If you’re still unsure about entering the market or don’t have the time, energy, or resources to do so, don’t worry; there are a number of professional licenced Portfolio Management Companies, such as Beed Invest, that offer a comprehensive range of products and services under Portfolio Management Services (PMS). These portfolio managers create portfolios that meet your risk appetite and invest on your behalf in the capital markets based on your investment goals and expectations. The portfolio manager charges nominal yearly and performance fees, and these services allow you to take advantage of the capital markets’ benefits. You can also entrust your current portfolio to these portfolio managers for reorganisation and management.
Overall, because the stock market is always changing and becoming more technical, ordinary investors should seek professional guidance and avoid investing based on herd mentality – buy carefully!