⏱ 4 min read
Many young Nepalis now apply for IPOs and trade shares online. The capital market helps companies raise long-term funds and gives savers a way to invest. This note explains the money and capital markets, primary and secondary markets, the key institutions (NEPSE, SEBON, CDSC), types of securities and common share-market terms.
1. Financial markets
| Money market | Capital market |
|---|---|
| Short-term funds (up to one year) | Long-term funds (more than one year) |
| Instruments: treasury bills, call money, certificates of deposit, commercial paper | Instruments: shares, debentures, bonds, mutual funds |
| Regulated mainly by Nepal Rastra Bank | Regulated mainly by SEBON |
| Primary market | Secondary market |
|---|---|
| New securities issued for the first time (IPO, FPO, right shares) | Existing securities are bought and sold among investors |
| Money goes to the company | Money goes from buyer to seller |
| Applications through banks and Mero Share | Trading through brokers on NEPSE |
2. Key institutions
| Institution | Role |
|---|---|
| Nepal Stock Exchange (NEPSE) | The only stock exchange; formed in 2050 BS from the Securities Exchange Centre (2033 BS); floor trading began in 2051 BS |
| Securities Board of Nepal (SEBON) | Regulator of the securities market, set up in 2050 BS; works under the Securities Act 2063 |
| CDS and Clearing Limited (CDSC) | Keeps shares in electronic (demat) form and settles trades; runs the Mero Share system |
| Stock brokers | Licensed members who buy and sell shares for investors |
| Merchant bankers | Manage public issues of companies (IPO, FPO, right shares) |
The NEPSE Index is the main index of Nepal’s share market; its base value was 100.
3. Types of securities
| Security | Meaning |
|---|---|
| Ordinary (equity) share | Ownership in a company; voting rights; dividend not fixed |
| Preference share | Fixed dividend paid before ordinary shareholders; usually no voting right |
| Debenture | Loan to a company with fixed interest; holder is a creditor, not an owner |
| Government bond | Long-term loan to the government with fixed interest |
| Mutual fund | Pools money from many investors and invests it through a professional fund manager |
4. Common terms
| Term | Meaning |
|---|---|
| IPO (Initial Public Offering) | A company’s first sale of shares to the public |
| FPO (Further Public Offering) | Additional shares sold to the public after the IPO |
| Right share | New shares offered only to existing shareholders in proportion to their holding |
| Bonus share | Free extra shares given to existing shareholders from profits or reserves |
| Dividend | Part of profit paid to shareholders (cash or bonus) |
| Demat account | Account that holds shares in electronic form |
| Bull market | Prices rising for a long period |
| Bear market | Prices falling for a long period |
| Market capitalisation | Total market value of all listed shares |
5. How an IPO works in Nepal
- A company gets approval from SEBON to issue shares to the public.
- An issue manager (merchant banker) prepares the prospectus.
- Investors apply through banks using ASBA or the online Mero Share system, with a DEMAT account.
- Shares are allotted by lottery if the issue is oversubscribed.
- After allotment the shares are listed on NEPSE and can be traded through a licensed broker.
6. Key facts
| Item | Fact |
|---|---|
| NEPSE | Nepal Stock Exchange, established in 2050 BS (1994); converted from the Securities Exchange Centre |
| SEBON | Securities Board of Nepal, regulator of the capital market, set up in 2050 BS |
| CDSC | CDS and Clearing Ltd, holds shares in electronic (DEMAT) form |
| Main law | Securities Act, 2063 |
| Capital gains tax on listed shares | Charged on profit when shares are sold, at rates set by the Finance Act |
| Mutual fund | Pools money from many investors and invests in shares and bonds |
7. How this topic is asked in the exam
Objective items ask the difference between primary and secondary markets, the full forms of NEPSE, SEBON, IPO, FPO and DEMAT, and which body regulates the market. Subjective questions ask about the role of the capital market in economic development. Explain how it collects savings, funds companies and spreads ownership, and mention risks such as speculation.
📌 Key points to remember
- Money market: short-term funds (NRB); capital market: long-term funds (SEBON).
- Primary market issues new securities; secondary market trades existing ones.
- NEPSE (2050 BS) is Nepal’s only stock exchange; it grew out of the Securities Exchange Centre (2033 BS).
- SEBON (2050 BS) regulates the securities market under the Securities Act 2063.
- CDSC keeps demat shares and runs Mero Share.
- Ordinary shares give ownership; debentures are loans with fixed interest.
- IPO: first public issue; right shares: for existing shareholders; bonus shares: free shares.
- Bull market rises; bear market falls.
📝 Quiz
Test yourself: Capital Market of Nepal
20 questions on Financial markets, Types of securities and Common terms.
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