You want to learn how to invest in share market in Nepal, also known as NEPSE.
But where exactly do you start?
What does it all mean?
Investing in the share market of Nepal can make you insanely rich. You can also make a full-time career out of it as Nirmal Pradhan did.
This is the most complete NEPSE Investing Guide to start investing in the share market of Nepal.
Let’s dive right in…
Why learn from me about investing in NEPSE?
I’m a former media officer at Sharesansar.
If you haven’t heard of it, Sharesansar is the top English stock market news portal in Nepal.
And I once kickstarted my journey as a beginner, just like you.
In fact, I document all my progress in NEPSE here on this website.
I know what it feels like to be a beginner – excited and hopeful, but confused by all the complexities.
This guide will take it slow but will take you till the end of investing in the share market of Nepal.
Understand the Basics of the Share Market in Nepal
To invest in a stock (share) is to own a portion of the company.
Stocks are issued by companies. A stock is simply proof of ownership in the company.
Cool.
And the Nepal Stock Exchange (NEPSE) is the only stock exchange (share market) in Nepal.
NEPSE is regulated by the Securities Board of Nepal (SEBON).
In simple words, SEBON is the police department of the stock market.
If you love stories, I have written a simplified guide about the idea of investing, and how it is different from gambling.
But if you don’t care, let’s just move on. You’re here to make money.
How to Open your Account to Start Investing in Nepal Share Market?
To start investing in the Nepal Share Market, you need to open a Demat account and a stock trading account.
A bank account is also needed, but I’m assuming you already have one.
The Demat account is like a bank account, but it stores your shares instead of money.
Meanwhile, a stock trading account is needed to buy and sell shares in the stock market.
Step 1: Open a Demat Account in NEPSE
The first, most-immediate benefit of having a Demat account is that you can apply for IPOs.
IPO stands for Initial Public Offering.
That didn’t explain much, did it?
So here’s how it goes: When a company wants to float its shares for the first time in NEPSE, it issues an IPO.
Now, almost all IPOs are offered at Rs. 100 per share.
When you apply for an IPO and get allotted the shares, you can sell them later at a higher price, almost with guaranteed profit.
Now, more than 70 companies in Nepal are excited and impatient to open a Demat account for you. This is because they make their money with Demat renewal fees and charges.
We recommend making one from either a commercial bank or a stockbroker company itself.
Now, to make this article short enough while still including everything, I have made a separate guide for you to open a Demat account in Nepal.
If you follow that guide by heart, you will have a Demat account, your CRN number, and a Meroshare online account to track everything from your phone.
Everything in check? Let’s move on!
Step 2: Open a Broker Account (Stock Trading Account)
A stock trading account enables you to enter the world of the share market.
Basically, it is an online portal where you will buy and sell shares already listed in NEPSE.
It’s a cool portal, let me tell you.
And remember: only stockbroker companies will open a stock trading account.
Stockbrokers open a broker account for you for free, but they take commissions and fees later when you buy or sell the shares.
It’s the rules of the game, my little duckling.
You must have guessed it by now, I have made another guide to opening a broker account in Nepal.
I know opening yet another tab makes you want to kill me, but it keeps this article from being 20,000 words long.
If you follow that guide, you should now have your own online trading account.
Different Investment Vehicles (Securities) to Invest in the Share Market of Nepal
Take a deep breath, because the technical part is already over.
Now, it is time to decide where you want to put your money in the share market.
These are the securities available in the share market of Nepal for you to invest in:
- IPOs
- Company shares (stocks)
- Mutual Funds
- Bonds and Debentures
- Right Shares
- Auction Shares
You can invest in one or more of these investment vehicles.
I think I should give you a brief overview of each of them.
IPO
As I said earlier, investing in an IPO is the first thing to do as a beginner in the share market of Nepal.
It only takes Rs. 1,000 and until the book-building system is introduced, IPOs guarantee almost-sure profits in Nepal.
There are no downsides, except that your Demat company will still take a small application fee every time, even when you’re not allotted the IPO shares.
Company Stocks
You buy and sell shares of listed companies in NEPSE.
If you train yourself and pick good stocks, you will be very rich in Nepal’s share market.
But if you choose the wrong stocks at the wrong time, you will see your money go away. Fast.
This is why it is so important to properly educate yourself before jumping right in like an impatient cat.
I will talk about various effective investment strategies in the latter part of this article.
Mutual Funds
Mutual funds are a relatively safer way to invest in the stock market.
Basically, you appoint a fund manager to invest your money.
They lessen your risk by investing in more than one stock, and even other safer securities like bonds and debentures.
However, one downside is that they take fund management charges.
Also, since risk management comes before profit maximization for mutual funds, you will see your money grow slowly compared to investing on your own at a handful of stocks.
Bonds and Debentures
Investing your money into bonds and debentures is as interesting as watching paint dry.
In simple words: you invest your money in them, and after 10 or 15 years, they return your money along with a percentage return.
This percentage return, also known as yield, is already decided when you invest in the bond or debenture.
The yield isn’t higher than 20% in Nepal, and bonds and debentures are better for wealthy people who only want to protect their wealth from inflation.
Right shares
A company issues the right shares just like an IPO, but it is only for investors who already own the shares of the company.
Right shares are also issued at Rs. 100 per share for most companies.
Like IPOs, they also guarantee almost-sure profit.
Auction shares
Shares are auctioned to the general investors when eligible shareholders do not claim the right shares.
Now, some people fail to grab the opportunity of the right shares.
Even though they own the shares of a company that’s issuing the right shares, they don’t claim their share.
Some just forget about it or don’t apply for countless other reasons.
However, shares are auctioned at a slightly higher price than the right shares. Nonetheless, you will still get the shares at a price lower than the market price.
How exactly do I make money in NEPSE?
The way to make money in the share market of Nepal is simple: buy shares at a cheaper price and sell them at a higher price.
The difference is the profit you make in the investment world.
It really is that simple . . . but not.
Finding the right strategy to buy cheap and sell high CONSISTENTLY is THE most challenging thing to do in the stock market.
The initial part of this article focused on the PROCESS of investing in the stock market.
However, the process isn’t what makes you money.
It is the strategy, which will be explained in the latter part of the article.
For now, these are the ways to make money in the stock market:
IPO Profit
As I already explained, companies must issue an IPO to the general public to be listed in NEPSE.
Till today, most companies have issued their respective IPO at Rs. 100 per share.
When you apply for the shares during the IPO, you get the shares at Rs. 100 per share.
These shares then get listed in NEPSE.
Now, if other investors feel the company is good, they demand the shares at a higher price.
Why so?
Because they believe the price can go even higher, and they can also sell the shares later at a profit.
It’s a crazy world.
Profit by speculation
This way has been explained already in the previous point.
Whether you get the shares in an IPO from the primary market or buy directly from the secondary market, you buy it with the expectation that the stock price will go higher.
Basically, you are speculating on a possible but uncertain future event.
Now, the accuracy of your speculation depends on the reliability of your investment strategy.
However, you should note that no investment strategy works 100% of the time.
Cash Dividend
Now, you may be thinking the only way to profit from a bunch of shares is to sell them at a higher price.
It’s true, but it’s not the whole story.
What if I told you, the shares that you buy allow you to receive cash incentives from the company?
From the profit that a company makes in a year, it distributes a portion of it as cash to shareholders.
The more shares you have, the higher the cash amount you’ll receive.
The greatest feeling for an investor is getting the mobile notification that the cash dividend has been deposited into your bank account.
Bonus Dividend
However, companies rarely distribute a significant amount of cash dividends.
The companies do not want to leave the extra profit money untapped by distributing it to you.
In business, cash is king.
Rather, your company will reinvest the profit.
But since it’s the profit earned with your investment, it offers you additional shares in the company.
Because you received the additional shares as a bonus, they are called bonus shares.
People are very smart with naming things. Duh.
Right Shares
Even after issuing an IPO, a company needs more capital.
One way to get more capital is by issuing additional shares to existing shareholders.
This happens in a rights offering.
The shares are called right shares because only existing shareholders can apply for the shares, i.e. have the right to do so.
FPO
A company can also issue shares again to the general public after already issuing a batch of shares to them.
However this time, it can’t call it an Initial Public Offering (IPO).
Rather, this re-issue is now called the Follow-on Public Offer (FPO).
Note: The bonus shares, right shares, and FPO shares also become ordinary (normal) shares after being listed in NEPSE.
The way to profit from them is also by selling them at a higher price than your buying price.
Nonetheless, the good thing about these offerings is that investors get the shares at Rs. 100 per share, which is often a lot cheaper than the company’s prevailing stock price.
Investment Strategies to Invest in Share Market in Nepal
This is the most important part of your investing journey.
And it is also the most overlooked.
Everybody becomes lucky and earns a profit in NEPSE once in a while.
But luck won’t take you to long-term wealth.
To make serious money from the share market of Nepal, you should find and learn an effective strategy.
One that makes you consistently profitable as you go.
Let’s discuss the most popular and effective investment strategies in the world of the capital market.
Fundamental Analysis in NEPSE
Fundamental analysis is a method that investors use to help them decide whether a company’s stock is a good investment or not.
To do this, they look at a bunch of different things, like how much money the company makes, how much debt it has, and how many customers it has.
They also look at things like the company’s management team, its competitors, and the overall state of the economy.
By looking at all of this information, investors can get a better idea of how well the company is likely to do in the future.
If they think the company is doing well and is likely to keep doing well, they might decide to buy the company’s stock. But if they think the company is struggling or is likely to struggle in the future, they might decide not to invest.
So, in short, fundamental analysis is all about looking at a company’s financial health and other factors to help investors decide whether to buy or sell its stock.
If you want to learn fundamental analysis, here are some great books:
- The Intelligent Investor by Benjamin Graham (All are links to Daraz Nepal.) The price of The Intelligent Investor in Nepal is Rs. 1,280 according to Daraz.
- One Up on Wall Street by Peter Lynch
- Warren Buffett and the Interpretation of Financial Statements
- Securities Analysis by Benjamin Graham
Technical Analysis in NEPSE
Technical analysis is another method that investors use to help them decide whether a company’s stock is a good investment or not.
But instead of looking at the company’s financial health, technical analysis looks at patterns in the stock’s price and volume over time.
Also Read: The essence of Fundamental and Technical Analysis: Which strategy is superior?
For example, an investor using technical analysis might look at a chart of a company’s stock price over the past few weeks or months.
They might look for patterns in the chart, like whether the price seems to be going up or down, and how quickly it’s changing.
They might look for patterns in the trading volume, like whether there are more people buying the stock or selling it.
By looking at all of this information, investors can get a better idea of how the stock is likely to behave in the future.
If they see a pattern that suggests the stock is likely to go up, they might decide to buy the stock. But if they see a pattern that suggests the stock is likely to go down, they might decide not to invest.
These books are a must-read if you want to learn technical analysis:
- Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications
- Trading in the Zone by Mark Douglas (All are links to Daraz Nepal)
Broker Analysis in NEPSE
Some investors in NEPSE argue that broker analysis works in NEPSE, better than standard strategies like fundamental or technical analysis.
They look at the buy and sell volume of each stockbroker company.
They claim this allows them to judge the accumulation or shares dumping in a particular stock.
This then allows an investor to decide whether he should buy the stock or sell it if he has it.
In my opinion, however, I think technical analysis is a much better way to study trading volume and market sentiment.
As a trend-following technical analyst, I believe the chart tells the entire story, and broker analysis is redundant.
How much money is needed to invest in Share Market in Nepal?
To invest in the share market in Nepal, you can start with Rs. 1,000.
Because that is how much it takes to apply for an IPO.
Meanwhile, the minimum investment in the secondary market depends on the market price of the shares.
Nonetheless, you must buy at least 10 unit shares of a company at a time, irrespective of its share price.
That is the minimum quantity allowed to be transacted at once.
Meanwhile, if you want to apply for a debenture, you must invest at least Rs. 25,000. This is yet another reason why I hate investing in debentures.
Which Share/ Stock is Best to Buy in Nepal in 2023?
The best stocks to buy in Nepal are GBBL, NICA, NABIL, SHINE, and SDLBSL.
However, note that “best” is subjective to what strategies you use and what your end goal is.
Since I’m a trend-following momentum swing trader, I only enter when the uptrend is already apparent.
My holding time can be as short as a few weeks to a few months.
If you are a value investor who uses fundamental analysis, you are looking for undervalued companies that have the potential to raise over the longer term.
In that case, you can buy the stock even when it is not showing any trending signs. Furthermore, getting to buy a value stock at a cheaper price is actually more beneficial for you, so you may actually be looking for stocks that are losing in the short run.
Some Helpful Resources to Invest in Share Market in Nepal
Congratulations!
If you followed this ultimate guide on how to invest in share market in Nepal till here, you are an informed investor.
You are already ahead of 70% of investors in NEPSE.
Now, in your investment journey, you will want to stay updated about the current happenings in NEPSE.
Thus, I have prepared a list of all websites that the best investors follow. It contains the official websites of the stock exchange as well as stock market news portals.
Furthermore, you may also want to download a few stock market apps on your phone.
The apps that I have on my list of stock market apps help you to stay on top of your investment and portfolio.
They also send you push notifications whenever a new IPO is issued, or a company declares its dividend, which is always helpful.
Meanwhile, if you want to learn more about investing strategies and all things NEPSE, I encourage you to check out my NEPSE Investing Guide series.
