The Nepal Stock Exchange (NEPSE) is the country's main stock market. Shares of listed companies, including banks, hydropower producers, insurers and other businesses, trade there, and the NEPSE Index shows how the market as a whole is moving. The Securities Board of Nepal (SEBON) regulates the market. This guide explains how an ordinary investor buys shares, step by step, and what to check before you commit money.
This is general information, not advice on which shares to buy. Check every step against the current rules from SEBON and the exchange, because market procedures change.
Step 1: understand the two ways to get shares
There are two main ways to acquire shares in Nepal.
- Buying in the secondary market. You buy shares that are already listed and trading on NEPSE, through a licensed stockbroker, at the price the market sets.
- Applying in an initial public offering (IPO). A company that is listing for the first time, or raising new capital, offers shares at a fixed price. Investors apply during the offer period, and the shares are allotted through a lottery if applications exceed the shares on offer.
Both routes need accounts, and both carry different risks. A secondary-market purchase shows you the current price and the trading history. An IPO shows you only the prospectus, and the price at listing can be higher or lower than the offer price.
Step 2: open the accounts you need
To buy listed shares you normally need three things.
- A Demat account. Shares in Nepal are held electronically rather than as paper certificates. A Demat account is the record of the shares you own. It is opened through a Depository Participant, usually linked to a bank or a broker.
- A trading account with a licensed broker. Orders are placed through a broker that is a member of the exchange. The broker holds the link between your bank money and your order.
- A bank account linked to both. The money for purchases comes from this account, and sale proceeds go back to it.
Ask the broker to confirm in writing which accounts they will open, the fees they charge, and how they hold client money. Check that the broker is licensed before you send any funds.
For IPO applications, many investors use an online application system that connects to their bank and their Demat account. Check the current procedure with your bank, because the steps have changed over time.
Step 3: understand how an order works
A secondary-market order tells the broker what to buy, how many shares, and at what price. The most common types are:
- A limit order sets the highest price you will pay. The order fills only if the market reaches that price or lower.
- A market order buys at the best available price now. It fills quickly, but the price can be worse than the last trade if the market moves fast or is thin.
Check whether the exchange has a daily price band, which limits how far a share can move in one session. A band stops a share from trading above or below a set range on a given day. Read the rules for the current band before you place a large order near the limit.
Shares are traded in lots. Check the minimum lot size for the share you want, so that your order is valid.
Step 4: check the company, not just the price
The price on the screen tells you what the last trade was. It does not tell you whether the company is sound. Before you buy, check the annual report and the latest quarterly figures. Look at:
- Profit and its trend. Is profit growing, flat or falling?
- Debt and capital. For banks and finance companies, check the capital adequacy and the level of non-performing loans. For other companies, check how much debt is carried compared with earnings.
- Dividends. Has the company paid dividends in cash, bonus shares, or both, and how consistently?
- Liquidity. Is the share traded every day? A share that rarely trades can be hard to sell at a fair price.
Our guide on how to read a stock chart shows how to read the price history, and the guide on trading volume explains why volume matters for selling as well as buying.
Step 5: think about the costs
Every trade has costs. Brokerage commission is charged on each buy and sell. There are also exchange fees, a depository fee for transferring shares, and taxes on gains and dividends, all set by current rules. A small trade can lose a large share of its value to fixed charges, so check the total cost before you decide the size of your order.
Worked example: a 10,000 rupee purchase
Suppose a share is trading at 500 rupees and you want to invest about 10,000 rupees. You buy 20 shares at 500 each, which costs 10,000 before fees. If the broker charges a commission of 1 percent on the purchase, you pay 100 more, so the total is 10,100.
| Item | Amount (rupees) |
|---|---|
| 20 shares at 500 | 10,000 |
| Broker commission, 1% (example) | 100 |
| Total paid | 10,100 |
If the price rises to 560, the 20 shares are worth 11,200. Before any sale costs, that is a gain of 1,100 on 10,100 paid. If the price falls to 440, they are worth 8,800, a loss of 1,300 on the same amount. Both results depend on the fees on the way out as well, which are not shown here.
Step 6: know how you will sell
Before you buy, know how you would sell and what it would cost. A sale goes through the same broker, at a price you can set with a limit order. Check how long the settlement takes and when the money reaches your bank account. Ask the broker for the schedule in writing.
Common mistakes
Buying an IPO because it is new. New listings are not automatically good value. Read the prospectus, check the company's business and debt, and ask what the money raised will be used for.
Ignoring the lot size and the daily band. An order that does not meet the rules is rejected, and a band can stop you from selling on the day you want to.
Trusting tips over the company's own figures. Rumours spread quickly in small markets. Check the figures the company publishes.
Putting all your money in one share. A single company can fall sharply on one bad result, a bank problem or a change in rules. Spread the money across several holdings, or across a fund, according to what you can afford to lose.
Forgetting the currency. Nepal's shares are priced in Nepalese rupees. If you earn or hold money in another currency, your return depends on the exchange rate as well. The guide on currency risk for foreign stocks explains this.
Checklist before you buy
- Confirm the broker is licensed and you have a Demat account and a linked bank account.
- Read the latest annual report and quarterly results for the company.
- Check the share's trading history, its volume and its daily price band.
- Work out the total cost, including commission and fees, for the amount you plan to invest.
- Decide the price at which you would sell, both if the trade works and if it does not.
- Confirm the amount is money you can afford to lose.
Key takeaways
To buy shares in Nepal, you need a Demat account, a licensed broker and a linked bank account. You can buy listed shares through the exchange, or apply for new shares in an IPO. Check the company's figures, the trading history, the daily band and the total cost before you place an order, and make sure you know how you would sell. The price is only one part of the decision.
This guide is for general information, not financial advice. See the disclaimer.