What Is the Share Market? How to Buy and Sell Shares in Nepal – Complete Beginner's Guide

 

What Is the Share Market? How to Buy and Sell Shares in Nepal – Complete Beginner's Guide

The share market is one of the most popular investment platforms in Nepal. Many people invest in shares of banks, hydropower companies, insurance companies, microfinance institutions, manufacturing companies, hotels and other listed companies with the aim of earning returns.

However, investing in the share market is not the same as keeping money in a bank account. Share prices can rise as well as fall, and investors can make profits or losses.

If you are a beginner and want to understand what the share market is, how it works, how to open a Demat account, how to apply for an IPO, how to buy and sell shares through TMS, and how investors earn money, this guide explains everything step by step.

What Is the Share Market?

The share market is a marketplace where investors can buy and sell shares and other securities of companies.

A share represents a portion of ownership in a company. When you purchase shares of a company, you become a shareholder of that company.

For example, suppose a company has issued 10 million shares and you own 1,000 shares. You own a small portion of that company.

According to the Securities Board of Nepal (SEBON), ordinary shareholders are considered owners of the company according to their shareholding. However, ordinary shares also carry investment risk because dividends are not guaranteed.

How Does the Share Market Work?

The basic process is:

Company → Issues Shares → Investors Buy Shares → Shares Listed on NEPSE → Investors Trade Shares

In Nepal, the secondary market operates through the Nepal Stock Exchange (NEPSE).

When investors want to buy or sell listed shares, they place orders through a licensed stock broker.

SEBON regulates Nepal's securities market and oversees market participants and intermediaries.

What Is NEPSE?

NEPSE stands for Nepal Stock Exchange.

It is Nepal's stock exchange where listed securities are traded.

When you hear statements such as:

• "NEPSE increased today."
• "NEPSE fell by 20 points."
• "Banking stocks increased."
• "Hydropower shares were traded heavily."

these statements generally refer to activities in Nepal's stock market.

The NEPSE Index is a market index that reflects changes in the overall market value of listed securities.

What Is SEBON?

SEBON stands for Securities Board of Nepal.

SEBON is the apex regulator of Nepal's securities market. It was established on June 7, 1993 and regulates the securities market under the Securities Act.

SEBON's responsibilities include regulation, supervision, investor education and protection.

Investors should use information from reliable and official sources and should be careful about unregistered investment schemes and misleading investment advice.

What Is CDSC?

CDSC stands for CDS and Clearing Limited.

CDSC provides services related to dematerialized securities, clearing and settlement.

It operates the Mero Share system, which allows investors to monitor their Demat holdings and use various online services.

What Is a Demat Account?

A Demat account is an electronic account used to hold your shares and other securities in digital form.

Demat is short for Dematerialized.

Instead of receiving physical share certificates, your securities are maintained electronically in your Demat account.

You need a Demat account to hold shares that you receive from IPOs or purchase in the secondary market.

What Is Mero Share?

Mero Share is an online platform provided through CDSC that allows investors to access their Demat-related information.

Using Mero Share, investors can generally:

• View their Demat holdings
• Check transaction information
• Apply for IPOs and other public issues through C-ASBA
• Check IPO application history
• View portfolio information
• Check details of corporate actions
• Submit e-DIS-related instructions where applicable

CDSC specifically advises investors to register for its internet-based Mero Share facility so they can monitor their Demat account themselves.

What Is a Trading Account?

A trading account is an account provided by a licensed stock broker that allows you to buy and sell securities in the secondary market.

In Nepal, investors commonly use an online trading platform known as TMS.

You need a broker account to trade listed shares in the secondary market.

What Is TMS?

TMS stands for Trade Management System.

It is an online platform used by stock brokers to facilitate share trading.

Through TMS, investors can:

• Buy shares
• Sell shares
• View market information
• Place buy orders
• Place sell orders
• Check orders
• View executed transactions
• Monitor their trading account

The exact features may vary depending on the broker and system configuration.

What Do You Need to Start Investing in Nepal's Share Market?

A beginner generally needs:

1. A bank account
2. A Demat account
3. A Mero Share account
4. A CRN number for public issue applications
5. A trading account with a stock broker for secondary-market trading
6. Access to the broker's online trading platform

For secondary-market transactions, SEBON advises investors to buy and sell securities through securities brokers that are licensed by the regulator and members of the stock exchange.

How to Open a Demat Account in Nepal

You can open a Demat account through a Depository Participant (DP).

A DP can be a bank, financial institution, merchant banker or another eligible institution authorized to provide depository services.

The general process is:

Step 1: Choose a DP

Select a suitable licensed Depository Participant.

Step 2: Complete the Account Opening Form

Provide the required personal and identification information.

Step 3: Submit Required Documents

Depending on the institution, you may need documents such as:

• Citizenship certificate
• Passport-size photograph
• Bank details
• Mobile number
• Email address
• Other KYC information

Step 4: Receive Your Demat Details

After the account is opened, you receive your Demat account information.

Step 5: Activate Mero Share

Request Mero Share access through your DP.

What Is a CRN Number?

CRN means C-ASBA Registration Number.

It is required when applying for IPOs and other public issues through the ASBA system.

You generally obtain your CRN from the bank where you maintain the relevant bank account.

What Is an IPO?

IPO stands for Initial Public Offering.

When a company offers its shares to the public for the first time, it is called an IPO.

For example, if a company issues shares to the general public at a particular issue price, investors can apply for those shares through the applicable ASBA process.

IPO applications in Nepal are commonly submitted through Mero Share.

How to Apply for an IPO in Nepal

The general process is:

Step 1: Log in to Mero Share

Open your Mero Share account.

Step 2: Go to My ASBA

Select the relevant public issue application section.

Step 3: Select the IPO

Choose the company or issue you want to apply for.

Step 4: Enter the Number of Shares

Enter the number of shares you want to apply for, subject to the issue's rules and available application limits.

Step 5: Select Your Bank and CRN

Select the applicable bank account and enter your CRN if required.

Step 6: Confirm the Application

Review the information carefully and submit the application.

The required amount is blocked in your bank account according to the ASBA process.

What Happens After Applying for an IPO?

After the IPO application period closes, the issue goes through the allotment process.

There are several possible outcomes:

• You receive the requested shares.
• You receive fewer shares than requested.
• You receive no shares.

If shares are not allotted, the blocked amount is released according to the applicable process.

After allotment and listing, allotted shares can become available in your Demat account for holding or, subject to applicable rules and listing, trading.

How to Buy Shares in Nepal

Buying shares in the secondary market is different from applying for an IPO.

Follow these general steps:

Step 1: Open a Broker Account

Choose a licensed stock broker and complete the required account-opening process.

Step 2: Obtain TMS Access

Your broker provides access to its trading platform.

Step 3: Deposit or Arrange Trading Funds

Make sure sufficient funds are available according to your broker's requirements.

Step 4: Search for the Company

Find the company you want to purchase.

For example:

• Commercial bank
• Hydropower company
• Insurance company
• Microfinance company
• Manufacturing company
• Hotel
• Investment company

Step 5: Place a Buy Order

Enter:

• Stock symbol
• Quantity
• Price
• Order type, as supported by the platform

Then submit the order.

Step 6: Wait for Execution

Your order is executed when it matches an appropriate sell order under the exchange's trading rules.

If your order does not match, it may remain pending or expire according to the applicable order rules.

How to Sell Shares in Nepal

Selling shares is also done through your broker's trading platform.

The basic process is:

1. Log in to your TMS account.
2. Select the share you want to sell.
3. Enter the quantity.
4. Enter your desired selling price.
5. Submit the sell order.
6. Wait for the order to match.
7. Complete the required post-trade settlement process.

For applicable transactions, investors must also complete the necessary securities transfer/settlement instructions.

CDSC advises investors to ensure that details such as ISIN and the number of securities are entered accurately when submitting delivery instructions.

How Do People Make Money From Shares?

There are two major ways investors may earn returns from shares.

1. Capital Gain

Capital gain occurs when you sell shares for a higher price than your purchase price.

Example:

You purchase:

100 shares × Rs. 500 = Rs. 50,000

Later, you sell:

100 shares × Rs. 650 = Rs. 65,000

Gross difference:

Rs. 65,000 − Rs. 50,000 = Rs. 15,000

However, actual profit must account for applicable transaction costs, taxes and other charges.

2. Dividend

A company may distribute part of its earnings to shareholders as dividends, subject to applicable laws, company performance and approvals.

Dividends may include:

• Cash dividend
• Bonus shares

A dividend is not guaranteed merely because a company makes a profit. SEBON also notes that ordinary-share dividends are not fixed or guaranteed.

What Are Bonus Shares?

Bonus shares are additional shares distributed to existing shareholders according to the company's approved bonus ratio and applicable regulations.

For example, if a company announces a 10% bonus share and you own 1,000 eligible shares, you may receive 100 additional shares, subject to the applicable conditions.

Bonus shares increase the number of shares you own, but this does not automatically mean your total investment value increases by the same amount.

What Is a Right Share?

A right share is an additional share offering made to existing shareholders according to a specified ratio and terms.

For example, a company may announce a right share issue in a ratio such as 1:2.

The exact eligibility, price, application procedure and other conditions depend on the particular issue.

What Is Face Value?

Face value is the nominal value assigned to a share by the company.

In Nepal, ordinary shares commonly have a face value of Rs. 100, although investors should always check the specific issue documents because securities can have different structures. SEBON's investor education material notes Rs. 100 as the usual face value for ordinary shares.

What Is Market Price?

The market price is the price at which a share is trading in the securities market.

For example, if a company's share is currently trading at Rs. 750, Rs. 750 is its market price at that point in time.

Market prices can change frequently because of supply and demand.

What Is Market Capitalization?

Market capitalization is the total market value of a company's listed shares.

A simplified formula is:

Market Capitalization = Market Price × Outstanding Shares

For example:

If a company has 10 million shares and the market price is Rs. 500:

Market Capitalization = 10,000,000 × Rs. 500

= Rs. 5 billion

Market capitalization is useful for comparing the size of companies.

What Is EPS?

EPS means Earnings Per Share.

A simplified formula is:

EPS = Net Profit ÷ Number of Shares

EPS indicates how much profit is attributable to each share based on the calculation period.

SEBON identifies EPS as an important measure of a company's profitability.

What Is P/E Ratio?

P/E means Price-to-Earnings Ratio.

A simplified formula is:

P/E Ratio = Market Price Per Share ÷ EPS

For example:

Market price = Rs. 500

EPS = Rs. 25

P/E = 500 ÷ 25

P/E = 20

Investors should not use P/E alone to decide whether a stock is cheap or expensive. It should be considered together with profitability, growth, business quality, debt, sector conditions and other factors.

What Is Book Value Per Share?

Book value per share is a measure based on a company's net assets attributable to shareholders divided by the relevant number of shares.

It can help investors understand the accounting value of a company's net assets per share.

However, book value should not be treated as the same thing as market value.

Fundamental Analysis

Fundamental analysis means studying a company's financial and business condition before investing.

Important factors include:

• Revenue
• Net profit
• EPS
• Net worth
• Book value
• P/E ratio
• Return on equity
• Debt
• Cash flow
• Dividend history
• Business growth
• Management quality
• Industry outlook
• Regulatory environment

SEBON's investor guidelines recommend studying a company's periodic and annual reports, financial condition, management and returns to investors before making investment decisions.

Technical Analysis

Technical analysis focuses mainly on market price and trading data.

Investors may study:

• Price trends
• Support and resistance
• Volume
• Moving averages
• Candlestick patterns
• RSI
• MACD
• Chart patterns

Technical analysis can help traders study market behavior, but it cannot guarantee future price movements.

Long-Term Investment vs Trading

Long-Term Investment

A long-term investor generally buys shares with the intention of holding them for a longer period.

The investor may focus on:

• Business quality
• Earnings growth
• Dividend potential
• Financial strength
• Long-term industry growth

Short-Term Trading

A trader may buy and sell shares over shorter periods to take advantage of price movements.

Trading requires:

• Market knowledge
• Risk management
• Discipline
• Understanding of price and volume
• Ability to control emotions

Short-term trading can involve significantly higher risk than simply holding a diversified portfolio for the long term.

What Are the Risks of the Share Market?

The share market does not guarantee profit.

Major risks include:

1. Market Risk

The overall market can fall due to economic, political, monetary or other factors.

2. Company Risk

A company's financial performance may deteriorate.

3. Liquidity Risk

Some shares may have relatively low trading activity, making it difficult to buy or sell large quantities at your preferred price.

4. Sector Risk

A particular industry may face problems that affect companies within that sector.

5. Emotional Decision-Making

Fear and greed can cause investors to buy at high prices or sell during panic.

6. Rumors and False Information

Social media groups and online discussions can contain inaccurate or misleading information.

Investors should verify important information using reliable sources.

Common Mistakes Beginners Should Avoid

1. Buying Shares Only Because Someone Recommended Them

Do your own research before investing.

2. Investing All Your Money in One Company

Concentration increases risk.

3. Buying Only Because the Price Is Low

A low share price does not automatically mean that a stock is cheap.

4. Following Social Media Rumors

Do not make investment decisions based solely on Facebook, TikTok, YouTube, WhatsApp or Telegram claims.

5. Ignoring Company Financial Reports

Financial performance matters.

6. Using Borrowed Money Without Understanding the Risk

Losses can become much more difficult to manage when borrowed money is involved.

7. Expecting Guaranteed Profit

No legitimate investment can guarantee that a share price will rise.

8. Panic Selling

A temporary market decline does not necessarily mean that the underlying business has become bad, but investors should evaluate the actual situation rather than blindly holding or selling.

How Much Money Should a Beginner Invest?

There is no single amount that is suitable for everyone.

A beginner should generally invest only money they can afford to keep invested and potentially lose.

Before investing, consider:

• Monthly income
• Monthly expenses
• Emergency savings
• Existing loans
• Financial goals
• Investment time horizon
• Risk tolerance

Do not invest money needed for essential household expenses.

How to Choose a Good Company?

There is no guaranteed formula for selecting a winning stock.

However, you can create a checklist.

Company Analysis Checklist

Business

• What does the company do?
• Does the business have long-term potential?

Financial Performance

• Is revenue growing?
• Is profit growing?
• Is EPS improving?

Debt

• Is debt manageable?

Management

• Is management credible?
• Are there governance concerns?

Valuation

• Is the market price reasonable compared with earnings and other financial measures?

Dividend

• Does the company have a sustainable dividend history?

Industry

• Is the industry growing or declining?

Market

• Is there sufficient liquidity?

SEBON also encourages investors to examine company reports, financial condition, management and investor returns before making investment decisions.

What Is a Bull Market?

A bull market is a period in which market prices generally trend upward.

Investors may become optimistic and buying activity may increase.

What Is a Bear Market?

A bear market is a period in which market prices generally trend downward.

Investor confidence may decrease and selling pressure may increase.

What Is a Portfolio?

A portfolio is the collection of investments owned by an investor.

For example, an investor's portfolio might contain:

• Commercial bank shares
• Hydropower shares
• Insurance shares
• Microfinance shares
• Manufacturing shares
• Mutual funds
• Debentures

Diversification can help reduce the risk associated with depending heavily on a single investment, although it cannot eliminate investment risk.

Share Market Trading Process in Simple Form

The overall secondary-market process can be understood as:

Open Bank Account

↓

Open Demat Account

↓

Activate Mero Share

↓

Obtain CRN

↓

Open Broker Account

↓

Get TMS Access

↓

Deposit/Arrange Trading Funds

↓

Research a Company

↓

Place Buy Order

↓

Order Gets Matched

↓

Complete Settlement/Transfer Requirements

↓

Shares Remain in Demat Account

↓

Sell Later Through Broker

↓

Complete Settlement

↓

Receive Sale Proceeds According to Applicable Settlement Process

IPO vs Secondary Market

Feature	IPO	Secondary Market
Meaning	New public issue	Trading of already-listed securities
Application	Usually through Mero Share/C-ASBA	Through stock broker/TMS
Price	Issue price determined for the offering	Market price
Counterparty	Issuing company/issue process	Another market participant
Allocation	Subject to issue rules/allotment	Based on matching buy/sell orders
Main Purpose	Participate in a public offering	Buy/sell listed shares

Important Terms Every Beginner Should Know

NEPSE: Nepal Stock Exchange

SEBON: Securities Board of Nepal

CDSC: CDS and Clearing Limited

Demat: Electronic securities account

Mero Share: Online platform for Demat-related services

CRN: C-ASBA Registration Number

IPO: Initial Public Offering

TMS: Trading platform used through a stock broker

EPS: Earnings Per Share

P/E: Price-to-Earnings Ratio

IPO Allotment: Distribution of shares among eligible applicants according to the applicable rules

Dividend: Distribution made to shareholders, subject to applicable requirements

Bonus Share: Additional shares distributed to eligible shareholders

Right Share: Additional shares offered to existing shareholders under specified terms

Market Capitalization: Market value of a company's shares

Bull Market: Generally rising market

Bear Market: Generally falling market

Is the Share Market Gambling?

The share market itself is not simply gambling.

Investment decisions can be based on company financial statements, business performance, valuation, economic conditions and other information.

However, buying shares without understanding the company, blindly following rumors, or taking excessive speculative risks can make investing resemble gambling.

The better approach is to learn, research, manage risk and make informed decisions.

SEBON emphasizes investor education and provides resources intended to help investors understand and manage investment risks.

Final Advice for Beginners

If you are completely new to the Nepal share market, do not rush to make large investments.

Start by learning:

1. How NEPSE works
2. How Demat works
3. How Mero Share works
4. How IPO applications work
5. How TMS works
6. How to read financial statements
7. How to calculate EPS and P/E
8. How dividends work
9. How market prices change
10. How to manage investment risk

Most importantly, never invest only because someone says that a particular share will definitely increase.

Study the company, understand the risks and make your own investment decision.

Frequently Asked Questions (FAQs)

What is the share market?

The share market is a marketplace where investors buy and sell shares and other securities. Buying a share generally represents ownership in a company.

How can I start investing in Nepal?

You generally need a bank account, Demat account, Mero Share access and, for secondary-market trading, a trading account with a licensed stock broker.

Can I buy shares without a Demat account?

For holding dematerialized shares, you need a Demat account. A Demat account is used to hold securities electronically.

Can I apply for an IPO without Mero Share?

IPO applications can be made through the applicable ASBA channels, and Mero Share provides an online route for eligible applications. Requirements can vary by issue and applicant.

Is profit guaranteed in the share market?

No. Share prices can rise or fall, and investors can lose money.

How do I earn money from shares?

Potential returns can come from capital gains and dividends, subject to market performance and company decisions.

What is the difference between IPO and secondary-market trading?

An IPO is a public offering of shares under an issue process, while secondary-market trading involves buying and selling already-listed securities through the stock exchange and licensed intermediaries.

Is the share market suitable for beginners?

Beginners can participate, but they should first understand how the market works, learn about risk and avoid investing money they cannot afford to lose.

Conclusion

The Nepal share market provides individuals with an opportunity to participate in the ownership of listed companies and potentially earn investment returns.

However, the share market also involves risk. Successful investing is not simply about finding a share whose price is rising. It requires knowledge, research, patience, discipline and proper risk management.

If you are a beginner, start with financial education before increasing your investment amount. Use official information from SEBON, NEPSE, CDSC, listed companies and licensed intermediaries whenever possible.

Disclaimer: This article is for educational and informational purposes only. It is not financial or investment advice. Share prices and investment returns are not guaranteed, and investors should conduct their own research and consider their individual financial circumstances before making investment decisions.