What is NEPSE? How the Nepal Stock Exchange works?

Last Updated: 6 October 2026

NEPSE stands for Nepal Stock Exchange. It is the only stock exchange in Nepal, the regulated marketplace where securities of listed companies are bought and sold after their first sale to the public. Every organized share transaction in the country passes through its trading system, yet no investor deals with NEPSE directly. Orders go through licensed brokers, ownership is recorded by a separate depository, and a regulator sets the rules for all of them.

The name is used in everyday speech. A news report that says NEPSE rose by 25 points refers to the NEPSE Index, a number that summarizes share prices. A statement that someone invests in NEPSE usually means that the person buys shares of companies listed on the exchange. Each usage points to a different part of one system. To understand NEPSE properly, a reader needs to see how those parts fit together.

This guide follows the logic of the system. It starts with the purpose of a stock exchange and NEPSE’s legal and corporate identity. It then covers the securities traded, the link with the primary market, the structure of the market and its participants, the full life of a trade from account opening to settlement, the rules that govern trading, the forces that move prices, the index and related statistics, the history of the exchange, and the main risks. Subjects that need technical depth, such as index methodology and order mechanics, are summarized here and linked to dedicated articles.

Several operating rules were revised in 2026, including daily price limits, circuit breakers, and trading days. Rules that can change are identified as such, and readers should confirm current details with NEPSE, SEBON, or their broker. This guide is educational and is not investment advice.

What a stock exchange is and why Nepal needs one

The problem an exchange solves

Consider how a shareholder would sell without an organized market. The seller must find a willing buyer, agree on a price, prove ownership, exchange money for the shares, and have the company register the transfer. Each step takes time, and each carries risk. The buyer cannot easily judge whether the price is fair, because there is no shared record of recent trades. The seller cannot be sure the buyer will pay, and the buyer cannot be sure the seller actually owns what is being sold.

These frictions make shares hard to sell. When a security is hard to sell, investors either avoid it or demand a higher return for holding it, which raises the cost of capital for the company that issued it. Nepal’s own history shows the effect. Shares were being issued to the public as early as 1937, but trading remained limited for decades, and only the creation of a government securities centre in 1976 and a full exchange in 1993 produced a continuous market.

What an exchange provides

A stock exchange replaces private bargaining with a common system. It brings orders from many participants into one place, so that buyers and sellers can find each other without searching. It sets the rules that decide who may trade, how orders are entered, how they are matched, and what happens when markets move sharply. It makes prices and volumes visible to everyone, so a recent trade becomes public evidence of value. It connects trading to clearing and settlement, so that an agreed trade ends in a completed transfer of money and securities. It also supports disclosure standards, because only companies that meet listing requirements and agree to continuing reporting can have their securities traded.

Why it matters to the economy

The deeper economic function is the reconciliation of two different time horizons. A hydropower project or a bank needs capital that stays committed for many years. Individual savers want the option to recover their money when circumstances change. A stock exchange resolves the conflict. The company keeps the money from the original sale of shares, and the saver can later sell those shares to another investor. Ownership changes hands while the company’s funding stays in place. Without that possibility, far fewer people would agree to put savings into long term business.

Two further effects follow. Public share ownership spreads the ownership of businesses across a broad base of investors. The continuous publication of prices and the public disclosure that comes with listing also create a flow of information about companies that is useful to lenders, regulators, and analysts, not only to shareholders.

NEPSE: identity, legal basis, and ownership

Legal definition and objective

NEPSE is Nepal Stock Exchange Limited, the company that operates the country’s only organized securities exchange. Nepali law treats a stock exchange as a market, place, or facility that regularly handles the purchase, sale, or exchange of securities. Securities cover shares, bonds, debentures, and units of collective investment schemes. NEPSE operates under company law and the Securities Act, 2063 (2007).

NEPSE describes its own objective as giving government and corporate securities marketability and liquidity, by facilitating transactions through members and market intermediaries such as brokers. Marketability means a security can be offered in an organized market. Liquidity means a holder can generally sell without unusual difficulty because other buyers and sellers are present. Liquidity is a matter of degree. A large bank’s shares usually trade actively, while a small company’s shares may have few buyers on a given day, and the exchange cannot change that.

Corporate form and ownership

NEPSE is a limited company, not a government department, but the state is its largest shareholder. NEPSE’s published ownership is as follows.

Shareholder	Published ownership
Government of Nepal	58.66%
Rastriya Banijya Bank	11.23%
Employees Provident Fund	10.00%
Nepal Rastra Bank	9.50%
Laxmi Bank Limited	5.00%
Prabhu Bank Limited	5.00%
Others	0.60%

The exchange is therefore predominantly publicly owned, which is a notable feature for an institution that supervises trading in private companies. The regulatory safeguard is the separation of roles. NEPSE operates the market, while SEBON licenses and supervises it and approves the rules under which it works. Shareholdings can change, so the current position should be checked in NEPSE’s disclosures.

What NEPSE does and does not do

NEPSE operates the electronic system that accepts and matches orders, admits registered securities to listing so that they can be traded, publishes prices, volumes, turnover, and indices, and applies the trading rules. Those rules include price limits, trading hours, and market halts, and changes to them require SEBON’s approval.

Equally important is what it does not do. NEPSE is not a broker, so it does not accept orders from the public. It does not trade for its own account, give investment advice, or guarantee prices. It does not hold investors’ securities or money, because custody and settlement belong to the depository described later. It is also not a company whose shares investors can buy. Investors buy the shares of the companies listed on it.

Securities traded on NEPSE

Shares

An ordinary share is a unit of ownership in a company. A shareholder has a residual claim on the company’s assets after creditors are paid, and holds rights that normally include receiving dividends when the company declares them, voting at general meetings, and taking part in bonus and rights issues. None of these rights guarantees income or profit. Dividends depend on company profits and board decisions, and the market price of a share can fall below the price the investor paid.

Two prices should be kept apart. The par value, or face value, is the nominal amount printed on the share, and ordinary shares in Nepal commonly carry a par value of Rs. 100. The market price is the price at which the share trades on NEPSE, and it can be far above or below par. Par value matters for accounting and for some regulatory thresholds. The market price is what an investor pays and receives.

Shares also differ by who holds them. Promoter shares are issued to a company’s founders and are generally subject to lock in periods before they can be freely sold. Public shares are those offered to the general investor. This distinction matters for indices, since a large part of a company’s capital may be held by promoters or the government and rarely traded.

Other instruments

Mutual fund units represent a share in a pooled portfolio managed by a fund manager. Listed units trade on the exchange at a market price that can differ from the fund’s net asset value, which is the value of the fund’s underlying holdings per unit. Debentures and bonds are debt instruments, so the holder is a lender, not an owner. They typically pay interest at a stated rate and rank ahead of shareholders if the issuer fails. Their prices are sensitive to interest rate changes. NEPSE’s stated objective also extends to government securities, reflecting the exchange’s origin in the securities centre that first made a market in government bonds.

Corporate actions

Corporate actions are decisions by a company that change what shareholders hold or receive. Four are common in Nepal.

A cash dividend is a payment out of profit to shareholders. A bonus share issue gives existing shareholders additional shares in proportion to their holdings, usually from retained earnings, at no cash cost to the holder. A rights issue offers existing shareholders the chance to buy new shares, normally at a set price and within a set period. A bonus or rights issue increases the number of shares outstanding.

The company fixes a book closure date. Only investors who appear on the share register on that date are entitled to the dividend, bonus, or right. Because purchased shares reach the Demat account only at settlement, which is two working days after the trade, an investor who wants to be eligible must buy early enough for the shares to be credited before book closure. Companies and the exchange publish the relevant dates, and investors should read them carefully.

Corporate actions also change prices mechanically. After a bonus issue, the same company value is spread over more shares, so the price per share falls without any loss of value to the holder. The exchange adjusts the reference price used for daily price limits, and index calculations are adjusted for such events so that the index measures only market movement. A falling price on an adjustment date is therefore not necessarily a market decline, and charts should be read with that in mind.

How securities reach the secondary market

The primary market

The primary market is where an issuer sells securities to investors for the first time, and the money paid goes to the issuer. The main routes are an Initial Public Offering (IPO) by a company offering shares to the public for the first time, a Further Public Offering (FPO) by a listed company raising more capital, a rights issue to existing shareholders, and issues of debentures and mutual fund units. Current and upcoming issues are listed on the Nepal IPO page.

SEBON registers and approves public issues, which is part of its mandate to register securities and protect investors. The issuer generally works with a licensed merchant banker, called the issue manager, who handles documentation, the prospectus, and the process of receiving applications.

From issue to trading

A security does not become tradable on NEPSE at the moment of issue. The path has several stages.

1. The issuer obtains SEBON’s approval for the issue and publishes a prospectus describing the company, the offer, and the risks.
2. Investors apply during the offer period. Applications are generally submitted electronically, and the application amount is blocked in the applicant’s bank account until the allotment is decided.
3. The issue manager allots shares. When applications exceed the shares on offer, allotment is typically made by a draw among eligible applicants, and the blocked amount is released for those who receive nothing.
4. Allotted shares are credited to the investors’ Demat accounts, and the money is paid to the issuer.
5. The securities are listed on NEPSE, which means the exchange admits them to trading. The interval between allotment and the first trading day varies.
6. From the first trading day, the securities trade in the secondary market, with prices determined by orders.

The detailed application procedure belongs to IPO guides. What matters for understanding NEPSE is the handover. The primary market creates the security and funds the company. After listing, the secondary market lets holders exit and lets new investors enter without any further involvement from the company.

The role of the secondary market

When an investor sells shares on NEPSE, the proceeds go to the selling investor, not to the company. The company’s share capital is unchanged, and only the identity of the owner changes. This is easy to overlook, and it explains why a falling share price does not directly reduce a company’s cash, although it can raise the cost of future fundraising.

The two markets reinforce each other. Investors are more willing to subscribe to new issues because an exit exists, and the quality of the secondary market, meaning its liquidity, transparency, and reliability, affects how easily companies can raise capital in the primary market. NEPSE is therefore part of the financing system, not just a place to speculate on prices.

Market structure and participants

A trade on NEPSE involves a regulator, the exchange, brokers, a depository, investors, and issuers. Each has a distinct function, and the market works because the functions are separate.

The regulatory framework

The Securities Board of Nepal (SEBON) is the apex regulator of the securities market. It was established in 1993 and derives its powers from the Securities Act, 2063. Its functions include advising the government on capital market development, issuing regulations and directives, registering securities, and licensing stock exchanges, brokers, dealers, merchant bankers, fund managers, depositories, and depository participants. It registers mutual funds and supervises collective investment schemes, approves the bye laws of the exchange and the depository, takes action against insider trading and other offenses, and works to protect investors.

Rules operate at several levels. The Securities Act sets the legal framework. Regulations issued under it deal with specific areas, and trading is governed by the Securities Trading Operation Regulations, 2075 (2018), which have been amended several times, most recently in 2026. NEPSE’s own bye laws and operating directives add detail, and SEBON approves them. An investor reading a rule should check which level it comes from and whether it is still in force.

Nepal Rastra Bank (NRB), the central bank, is not the securities regulator, but its decisions affect the market indirectly. NRB supervises banks and financial institutions and sets monetary policy, which influences interest rates and the availability of credit. It is also a shareholder in NEPSE. The market effects of its policy are discussed in the section on price movements.

The exchange and its trading system

Within this framework, NEPSE operates the trading system, which receives orders from member brokers, maintains the order book for each security, matches orders according to the rules, and publishes the results. Its market data includes prices, volumes, turnover, indices, and market depth, which is the queue of buy and sell orders waiting at different prices. NEPSE publishes this information for all participants, so that no investor receives it later than another.

Brokers and the Trade Management System

Stock brokers are licensed intermediaries and members of the exchange. Only members can enter orders, which is why every investor needs a broker. The broker opens a trading account for the client, completes Know Your Customer verification, enters the client’s orders into the system, and takes responsibility for the money and share delivery involved in each trade. Brokers typically ask clients to deposit funds or collateral before accepting buy orders. This follows from the broker’s position in the settlement process, since the broker is answerable to the clearing system for the client’s obligations. The broker charges a commission on each trade.

Access is through the Trade Management System (TMS), an online portal that each broker operates for its clients. Each broker issues its own login and web address, so there is no single investor portal for order entry. The quality of a broker’s platform, its commission structure, its collateral rules, and its customer support are practical points of difference. Licensing can be verified with SEBON before an account is opened.

Clearing, depository, and settlement

CDS and Clearing Limited (CDSC) is Nepal’s central depository, clearing, and settlement company. It is a wholly owned subsidiary of NEPSE, promoted in 2010 and inaugurated on 31 March 2011, and it operates under SEBON’s regulations. Its functions include safekeeping securities in dematerialized form, recording ownership, transferring securities after trades, supporting electronic public issues, and clearing and settling transactions executed on NEPSE. CDSC also runs the MeroShare service, through which investors view their holdings and apply for public issues.

The relationship between NEPSE and CDSC is one of sequence. NEPSE handles the trade, meaning the matching of orders. CDSC handles what follows, meaning the determination of obligations and the transfer of ownership and money. Although the two companies share an owner, their functions are separate, and that separation means the party that runs the market is not the party that holds investors’ assets.

A Demat (dematerialized) account is the electronic account in which an investor’s securities are recorded, replacing paper certificates. Investors open Demat accounts through depository participants, which are licensed institutions authorized to deal with the public, many of them banks. Holders of older paper certificates can have them converted into electronic form through a depository participant. The Demat account holds securities. It does not place orders, which is the function of the trading account with a broker.

Investors

Retail investors are individuals investing their own money. Institutional investors manage pooled or fiduciary funds and include mutual funds, insurance companies, banks, and provident funds. Non Resident Nepalis can also invest, subject to the rules that apply to them. Retail participation is substantial in the Nepali market, and its behavior, which can be strongly influenced by sentiment and information flows, shapes market movements.

Institutions matter for another reason. Their orders are often larger than retail orders, so in a thinly traded share they can move the price more than an individual can. They are also subject to their own regulations on what they may hold, which affects their demand for particular types of securities.

Listed companies

Listed companies are public companies whose securities have been admitted to trading. They come from banking, development banking, finance, hydropower, insurance, microfinance, manufacturing, hotels and tourism, trading, and other sectors. The sector mix matters, because it determines which economic forces influence the market.

Listing carries continuing obligations. Companies must publish audited annual accounts and periodic interim financial reports, announce price sensitive events, and announce corporate actions such as dividends, bonus issues, and book closure dates. These disclosures are the information base on which investors form views of value. They are not a certificate of quality, and a listed company can be loss making, highly indebted, or poorly governed.

Supporting intermediaries

Merchant bankers act as issue managers and may underwrite issues, which means committing to buy unsubscribed shares. Credit rating agencies assess the credit quality of issuers and debt instruments. Auditors verify the financial statements on which disclosure depends. Fund managers run mutual funds under SEBON’s supervision. Each supports a particular part of the primary or secondary market.

NEPSE, the stock market, and the share market

Nepali usage treats NEPSE, the stock market, and the share market as near equivalents. The reason is practical. Nepal has one exchange, so almost all organized trading in listed securities takes place on NEPSE, and the institution’s name has become a label for the whole activity. The terms nevertheless have different scopes.

Term	Scope
NEPSE	The exchange, meaning the institution and system through which listed securities are traded
Stock market or share market	The wider system for issuing and trading shares, covering the primary and secondary markets, investors, brokers, issuers, the regulator, and the depository
Capital market	The still broader market for long term funding, which also includes bonds, debentures, and other instruments

Share market and stock market mean the same thing in Nepali usage, with share market the more common everyday phrase. In practice, the correct usage depends on context. A statement about the day’s movement refers to the index. A statement about how orders are matched refers to the exchange. A statement about how companies raise money, how investors are protected, and how trades are settled refers to the market as a whole. Using NEPSE for everything is acceptable shorthand, but it hides the roles of SEBON, the brokers, and CDSC.

The life of a trade

The following sections trace one purchase from account opening to the investor’s holding, using a single example. An investor wants to buy 100 shares of a listed company.

Preparing accounts and access

Three things are needed before the first order: a bank account, a Demat account, and a trading account with a broker. The Demat account is opened through a depository participant. The trading account is opened with a licensed broker, which verifies the investor’s identity, links the bank and Demat accounts, and issues TMS credentials. The broker may require funds or collateral to be placed with it before buy orders are accepted. The terms differ between brokers, so they should be understood before trading.

At this stage, the investor holds no shares and has placed no order. What exists is the infrastructure for the three flows the trade will use: money through the bank account, orders through the TMS, and securities through the Demat account.

Reading market information

Before ordering, the investor consults market data, which NEPSE and data providers publish for each security. The main fields are the previous close, the opening price, the highest and lowest prices of the day, the last traded price, the percentage change from the previous close, the number of transactions, the volume, and the turnover. Many data providers also show the highest and lowest prices of the past 52 weeks.

The previous close carries special importance, because daily price limits are calculated from it. The last traded price is the most recent agreed price, not a promise that shares are available at that price. The market depth shows what is actually waiting to be bought or sold, and a wide gap between the best buy and sell prices indicates a security that trades thinly. Volume and turnover indicate how easily a position could be entered or exited.

Placing the order

The investor submits an order through the TMS that specifies the security, the direction, the quantity, and the price. The investor states a maximum price for a purchase and a minimum price for a sale. Because the investor names the price, orders on the TMS operate in practice as limit orders. A limit order controls the price but not the outcome, since it may not be filled if the market does not reach the stated price. Some published guides refer to market orders, which would execute at the best available price, but sources are not consistent on this. The available order types depend on the platform, so the broker should confirm them.

Before forwarding the order, the system performs checks, including whether the client has enough funds for a purchase or enough shares in the Demat account for a sale, and whether the price falls within permitted limits. Quantities below ten shares are odd lots under the trading regulations, and they are treated separately and do not affect price limits or index movements. Since the 2026 amendments, orders can also be entered outside session hours and queued for the next session. The article on NEPSE trading hours, orders, and how share trading works covers order handling in more detail.

The order book and matching

Accepted orders join the order book of the security. The book shows buy orders ranked from the highest price down, and sell orders ranked from the lowest price up. Among orders at the same price, the earlier entry ranks first. This is price and time priority. A trade is possible only when the best buy price is equal to or above the best sell price.

The following illustration uses invented figures for one security.

Side	Order	Quantity	Price (Rs.)	Entered
Buy	A	100	500	11:02
Buy	B	200	500	11:05
Buy	C	100	498	11:03
Sell	X	150	502	11:01
Sell	Y	100	505	11:04

No trade is possible at first, because the best buy price of Rs. 500 is below the best sell price of Rs. 502. A new sell order Z then arrives for 250 shares at Rs. 500. It matches first with buy order A, which has the best price and the earliest time, for 100 shares. It then matches with buy order B for the remaining 150 shares. Order B is left with 50 shares unfilled, and order C is untouched because its price is lower. Both trades occur at Rs. 500.

The example shows several general points. Matching is mechanical, with no discretion about who trades first. An order can be filled in part, so the executed quantity must be checked. An order that finds no match remains in the book until it is filled, cancelled, or lapses at the end of the session. A limit order can also execute at a better price than the limit if a better opposing order is waiting, since a buyer’s limit is a ceiling and a seller’s limit is a floor.

How the price emerges

The price of a share has no fixed source. It emerges from the interaction of orders. A buyer who bids higher wins priority over other buyers, and a seller who asks less wins priority over other sellers. Prices move when the balance between them shifts. If buyers become more eager and raise their bids, trades occur at higher prices. If sellers become more eager and lower their asks, trades occur at lower prices. The last traded price records where the two sides last agreed.

The daily cycle begins with the pre-open session, in which orders are collected and an opening price is determined within a permitted range, which is 5% under the 2026 rules. In call auctions generally, the opening price is the one at which the largest quantity can be matched, and NEPSE’s rules specify the exact method. Continuous matching then runs through the regular session. The price on screen is therefore a market price, not a valuation. It reports what participants were willing to pay at that moment. Whether it is reasonable depends on analysis of the company, which is the subject of the supporting articles on analysis.

Execution is not completion

An order passes through distinct statuses: submitted, accepted, partly executed, fully executed, and settled. An executed trade is an agreement, in which the buyer owes money and the seller owes securities. It is not yet a transfer of ownership. This is why the TMS can show a trade as executed while the shares are not yet in the buyer’s Demat account.

Clearing and settlement

After execution, CDSC determines the obligations arising from the day’s trades. Clearing means calculating what each clearing member owes and is owed, and in practice it nets positions, so that a broker that bought and sold the same security on behalf of different clients settles only the net difference. Settlement then performs the transfers.

NEPSE trades settle on a T+2 basis, meaning two working days after the trade date, which is called T. CDSC adopted T+2 in July 2017, replacing T+3. The buyer must have funds available to pay, and the seller must deliver the shares. Sellers typically give an electronic delivery instruction, often called EDIS, through CDSC’s system, authorizing the release of the shares from their Demat account. On the settlement date, the buyer’s Demat account is credited with the shares, the seller’s is debited, and the money moves from buyer to seller, net of costs.

Weekends and market holidays are not counted as working days. With a Monday to Friday trading week, a trade on Monday settles on Wednesday, and a trade on Thursday settles the following Monday, since Friday is T+1 and the weekend is skipped. A holiday would push settlement back by a further day.

After settlement

Once the shares are in the Demat account, the investor owns them outright. The holding can be viewed in the investor’s CDSC account, and the investor is eligible for dividends, bonus shares, and rights as long as the shares are registered on the relevant book closure date. The investor can sell the shares later, which starts the same sequence in reverse. Settlement is also the point at which a sale becomes possible, so shares bought on a given day generally cannot be sold on the same day. Short selling, which is selling securities that the seller does not own, is not available to ordinary investors. Brokers should be asked to confirm both points, since rules can change.

Costs

Every trade carries costs that reduce the investor’s result. They include the broker’s commission, a regulatory fee payable to SEBON, a charge by the depository participant for share transfers, and capital gains tax on profits from sales. Commission is typically tiered by transaction value. Rates and rules for these items are revised from time to time, so current schedules should be checked, and the total cost of a round trip should be calculated before trading. A small price move may not cover the costs of buying and selling, especially for frequent traders.

Rules that govern trading

Sessions, days, and hours

The regular trading session runs from 11:00 AM to 3:00 PM. Since April 2026, NEPSE has traded from Monday to Friday, after the government adopted a Saturday and Sunday weekend, and it previously traded from Sunday to Thursday. The trading week has been adjusted several times in recent years, so the schedule and holiday closures should be checked in NEPSE’s notices.

The amended regulations allow orders to be entered outside session hours. A facility for such after market orders on the TMS was reported in August 2026. These orders are queued, validated for sufficient funds or shares, and executed only when the market is open. An order that is not executed during the day lapses.

Price limits

The first safeguard is a daily limit on each share’s movement. Since the amendments that took effect on 20 April 2026, a share may rise or fall by up to 15% from the previous day’s closing price, compared with 10% previously. A wider limit allows prices to adjust to new information more quickly, and a narrower one dampens volatility but can leave a share stuck at its limit with no sellers or buyers, a situation reported as a price lock.

Reports on the amended regulations describe further bands on order entry. The permitted price movement in the pre-open session was widened from 2% to 5%, and during continuous trading the band for order prices was set at 3% around the prevailing price, up from 2%. The precise reference prices and application of each band are set out in the regulations, which should be consulted for exact treatment.

Circuit breakers

The second safeguard is a market wide halt based on the NEPSE Index. If the index moves 5% within the first two hours of continuous trading, trading stops for 15 minutes. If the index moves 8%, the market closes for the rest of the day. This two tier structure replaced a three tier system with thresholds of 4%, 5%, and 6%. Reports differ on whether the 8% is measured from the previous close or from the level at reopening, so the official circular should be consulted.

Purpose and limits of the controls

These measures serve two purposes. They slow panic selling and speculative surges, giving participants time to absorb information and brokers time to manage their clients. They also reduce the chance that a disorderly session undermines confidence in the market. They do not remove risk. A share that moves to its limit day after day has not become safer or sounder, and a market halt does not alter the conditions that caused it.

The restrictions on same day trading and short selling have a different rationale. They follow from the settlement chain, since securities are not delivered until settlement and the exchange does not permit sales of securities that are not in the seller’s account. Whether and how such practices might be introduced in the future is a matter of regulation, and the current position should be confirmed from official sources.

Why prices and the index move

The index changes only because the prices of its constituents change, and those prices respond to the intentions of buyers and sellers. The forces below act together, and their relative weight shifts over time. The article on why the NEPSE Index rises and falls examines each in more depth.

Company results and expectations

Profit, earnings per share, dividend capacity, and asset quality drive the value investors place on a company. What moves prices, however, is the difference between results and expectations. A profit increase that was already expected may produce no price rise, and a smaller increase than hoped for may produce a fall. Announcements of dividends and bonus shares affect demand, and so do changes in management, debt levels, and project progress.

Interest rates and the central bank

Interest rates set the return available on safer alternatives such as bank deposits and government securities. When deposit rates rise, the relative appeal of shares falls and some investors move funds out, and when rates fall the reverse can happen. Higher rates also raise companies’ borrowing costs. NRB’s monetary policy influences these conditions, and its regulations on bank lending, including lending against shares, affect how much borrowed money can enter the market.

Liquidity and leverage

Liquidity here means the amount of money available in the financial system for investment. Ample liquidity increases buying power, and tight liquidity reduces it. Leverage, meaning investment with borrowed money, amplifies the effect. Investors who borrow to buy shares may be forced to sell if prices fall, which can accelerate a decline, so that conditions that supported a rise can reverse quickly.

Policy, budget, and politics

Budgets, tax changes, regulatory decisions, and political developments change expectations about business conditions and risk. Markets often react to the expectation before the policy takes effect, and sometimes reverse once details emerge. Sector specific policy, such as rules affecting hydropower or banking, can move the relevant shares sharply.

Sector weight and index concentration

Because the index is weighted by market capitalization, sectors with large market values dominate it. Banking, finance, and insurance have accounted for roughly half of total market value in reported figures, which means news about large financial institutions can move the index even when most other shares are unchanged. The market can also look weak or strong in the index while the typical share does something different.

Sentiment and information

Sentiment is the collective mood of participants. It can raise prices ahead of any change in company fundamentals and depress them even when the fundamentals are sound. Rumors, social media, and herd behavior feed it. Rumors may be false, incomplete, or already reflected in the price, so the reliable sources are company announcements and exchange and regulator notices.

The NEPSE Index and other indices

What an index is for

An index condenses the movement of many prices into one figure. Without one, assessing whether the market as a whole has risen or fallen would require comparing hundreds of individual prices. An index serves as a benchmark for portfolio performance, a gauge of market sentiment, and a basis for products such as index tracking funds. Its usefulness depends on how it is constructed, and each NEPSE index has different construction and purpose.

Construction of the NEPSE Index

The NEPSE Index is the headline benchmark. It is a market capitalization weighted index, calculated as the total market capitalization of all listed companies divided by the base market capitalization, multiplied by 100. Market capitalization is the share price multiplied by the number of shares outstanding. The base date is 12 February 1994 (30 Magh 2050), when the index was set at 100. That differs from 13 January 1994, when the trading floor opened.

A level of 2,100 therefore means the total market capitalization is about 21 times the base value after adjustments. The adjustments matter. New listings, bonus shares, rights issues, and similar events change the number of shares, so the base is adjusted to keep the index responding to price changes and not to changes in share counts. The index includes all listed shares, including large blocks held by promoters and the government that rarely trade. The article on how the NEPSE Index is calculated sets out the method in full.

Reading index movements

A point is a unit of the index and has no rupee value. Its meaning depends on the level, so the percentage change is the clearer measure. A move from 2,100 to 2,150 is 50 points, or about 2.38%, while the same 50 points at a level of 3,000 is about 1.67%.

Weighting means the size of a company determines its influence. As a hypothetical illustration, if companies making up half of the total market value rise by 4% while all others are unchanged, the index rises by about 2%, from 2,100 to roughly 2,142. A few large stocks can therefore account for most of a day’s index movement. Market reports often supplement the index with the number of securities that rose and fell, called market breadth, which shows whether a move was widely shared. An index move is also not a personal return, because an individual portfolio holds different companies in different proportions.

Sensitive, Float, and Sensitive Float indices

The Sensitive Index has been calculated since 1 January 2007. It covers a narrower group of larger, established companies chosen under criteria set by NEPSE, and it shows how that segment is performing. The Float Index and the Sensitive Float Index were introduced in 2008 and aim to reflect only shares available for public trading, excluding promoter and government holdings. Published explanations state that NEPSE lacked a formal method for measuring public float, so these indices have used the ordinary shares of the relevant companies. The current methodology should be checked for the exact basis.

The indices began on different base dates with different base values, so their levels are not comparable with one another and cannot be read as growth since 1994. Each should be tracked against its own history. The article on NEPSE indices explained covers each in detail.

Sector indices

NEPSE also publishes sector indices, which cover groups such as banking, development banks, finance, hydropower, microfinance, life and non life insurance, manufacturing and processing, hotels and tourism, trading, investment, and mutual funds. They allow investors to see which parts of the economy are driving the market, and they help explain days when the headline index and sector movements diverge. A sector index can rise while the overall index falls.

Market statistics

Three statistics describe the scale and activity of the market. Trading volume is the number of shares traded in a period. Turnover is the rupee value of those trades, calculated by multiplying the number of shares by the price of each trade and adding the results. Market capitalization measures size, as defined above, and summed across all listed companies it gives the size of the market.

Volume and turnover can diverge. A trade of 1,000 shares at Rs. 500 and a trade of 10,000 shares at Rs. 50 each produce turnover of Rs. 500,000, even though the volumes differ tenfold. A company with 10 million shares priced at Rs. 250 has a market capitalization of Rs. 2.5 billion, which is the value the market places on its shares and not its accounting net worth. Free float market capitalization counts only the shares available to the public. High volume and turnover show active trading and good liquidity, and they do not show that investors are making money, since every trade has both a buyer and a seller. The article on NEPSE turnover, trading volume, and market capitalization explains how to read these figures.

History of NEPSE

Early securities activity and the legal base

According to NEPSE’s own account, the history of securities in Nepal began in 1937, when Biratnagar Jute Mills and Nepal Bank floated shares. The Company Act of 1964 and the first government bond, issued in the same year, widened the range of legal and financial instruments. In 1976 the government established the Securities Exchange Centre, which handled brokering, underwriting, public issue management, and market making in government bonds. The Securities Exchange Act of 1983 supplied the first legal framework for the securities market. Sources give differing dates for some of these early events, and this guide follows NEPSE’s account.

Conversion and opening

In 1993, as part of a capital market reform program, the government converted the Securities Exchange Centre into the Nepal Stock Exchange. SEBON was established in the same year, separating the regulatory role from the operational one. NEPSE opened its trading floor on 13 January 1994 (29 Poush 2050). Trading was by open outcry, in which brokers called out bids and offers in the trading hall and trades were recorded manually. The index was first calculated on 12 February 1994.

Technology and infrastructure

Modernization came in stages. On 24 August 2007, NEPSE replaced open outcry with fully automated screen based trading. CDSC was promoted in 2010 and inaugurated in 2011, introducing a central depository and electronic clearing and settlement. Paper certificates gave way to Demat holdings, and listed companies were required to dematerialize their shares. In July 2017 settlement moved from T+3 to T+2. The NEPSE Online Trading System went live in November 2018, and online trading through broker portals became the standard way to access the market. Each step reduced the cost and delay of trading and widened access, particularly for investors outside the capital.

Market cycles

The index has moved in pronounced cycles. It peaked at 1,881.45 in fiscal year 2073/74 (2016/17). A market review of the decade to 2019 attributed that rise mainly to the NRB directive requiring banks and financial institutions to raise their capital, which increased demand for such shares as they issued bonus and rights shares, and it linked later weakness to factors including higher bank deposit rates.

The index then reached a record closing high of 3,198.60 on 18 August 2021, when the daily price limit was 10%. By 3 June 2022 it had fallen to 2,078.71, about 35% below that peak, and at the end of fiscal year 2080 (mid April 2024) it closed at 2,025.30, still about 37% below the record. The surge is commonly linked to abundant liquidity and low interest rates, and the subsequent decline to tighter conditions, although no single cause accounts for either.

These cycles show the practical significance of the forces discussed earlier. Liquidity, interest rates, regulation, and sentiment can move the whole market far enough to change the experience of an investor who bought at the wrong time.

The 2026 revisions

The 2026 amendments to the Securities Trading Operation Regulations are the latest stage of rule development. NEPSE prepared the changes, SEBON approved them, and the Fourth Amendment took effect on 20 April 2026. They changed daily price limits, circuit breakers, and order entry procedures, as set out in the section on trading rules. The move to a Monday to Friday trading week followed the government’s change of weekend in April 2026.

Risks investors face and common mistakes

Understanding how the exchange works does not remove the risks of investing in it. The main ones are listed below, along with the mistakes that most often accompany them.

Price risk

Share prices can fall, sometimes sharply, and there is no guarantee of recovery. The decline of roughly 35% between August 2021 and June 2022 is a historical example. A common mistake is to treat a rising price as proof of quality. A price rise shows that demand exceeded supply during a period. It does not show that the company is sound or that the trend will continue.

Liquidity risk

A share with few buyers and sellers may be difficult to sell at the desired price, and the quoted price may not be achievable for a large quantity. Investors should check volume and market depth before buying, and should not assume that a listed security can always be sold quickly.

Concentration risk

Holding few securities, or securities from one sector, exposes a portfolio to a single type of shock. Because banking and finance carry such a large weight in the market, an investor holding only those shares is exposed to the same forces that dominate the index. Diversification across companies and sectors reduces this risk but does not eliminate market risk.

Leverage risk

Borrowing to buy shares magnifies losses as well as gains. If prices fall, the loan and its interest remain, and the investor may be forced to sell at a loss. The risk is higher in a market that can move 15% in a day.

Information risk

Rumors and unverified tips can move prices, but they may be wrong or already reflected in the price. The reliable sources are company announcements, audited financial statements, and notices from NEPSE and SEBON.

Rule and operational risk

Trading rules, schedules, and fees change, so decisions based on outdated information can be costly. Digital access creates operational risks, including system outages and unauthorized access to an account. TMS and MeroShare credentials should be protected, and confirmations should be checked after every order.

Intermediary risk

Dealing with unlicensed brokers or advisers exposes investors to losses that the regulatory framework is designed to prevent. SEBON licenses brokers and other market businesses, and licensing should be verified before money is deposited.

Key points

• NEPSE is Nepal’s only stock exchange. It operates the trading system and the market data, while SEBON licenses and supervises the market and approves the rules.
• Investors trade through licensed brokers, hold securities in Demat accounts, and rely on CDSC for clearing and settlement, which takes two working days.
• Prices form from the orders that participants place, and the NEPSE Index summarizes them as a market capitalization weighted measure that is dominated by large companies.
• Prices move because of company results, interest rates, liquidity, policy, and sentiment, and the market has gone through large cycles.
• Price limits, circuit breakers, and trading days were revised in 2026, and changeable details should always be confirmed with official sources.

Frequently asked questions about NEPSE

Final thoughts

NEPSE is best understood as one component of a connected system. The exchange provides the marketplace, brokers provide access to it, CDSC provides custody and settlement, and SEBON sets and enforces the rules, with issuers and investors on either side. The index summarizes the outcome of the orders those institutions process, and its movements reflect company results, funding conditions, policy, and sentiment. Because several operating rules were revised in 2026, the specific limits and schedules in this guide should be treated as a snapshot and confirmed against official sources.

For investors moving from structure to analysis, the next step is learning to read the market and the companies in it. The guide on how to analyze NEPSE and understand market trends covers the market side, and the comparison of fundamental and technical analysis for NEPSE explains two ways of studying individual shares. This article is educational and does not replace advice from a licensed financial professional.