The Nepal Stock Exchange (NEPSE) stands as the cornerstone of Nepal’s capital market, facilitating the trading of equities, debentures, and other securities in one of South Asia’s emerging economies. Established in 1994, NEPSE has evolved from a modest trading floor in Kathmandu to a digital platform serving over 272 listed companies and millions of investors. As of September 28, 2025, the market capitalization hovers around NPR 465,698.5 crore (approximately US$34 billion), reflecting steady growth amid economic challenges like inflation and political unrest. This article delves into every facet of NEPSE—from its historical roots and operational mechanics to current performance, regulatory landscape, and future trajectory—offering a thorough guide for investors, analysts, and enthusiasts.
Historical Evolution
Nepal’s journey into organized stock trading began in the mid-20th century, but the modern framework took shape in the 1970s. The Securities Exchange Center (SEC) was founded in 1976 under the Companies Act, 1973, primarily to handle government securities and a handful of corporate bonds. However, it lacked a robust secondary market for equities.
The pivotal shift occurred with the enactment of the Securities Exchange Act of 1983, which laid the groundwork for a full-fledged exchange. In 1993, the SEC was restructured and converted into the Nepal Stock Exchange Limited (NEPSE), a public limited company. Trading officially commenced on January 13, 1994 (29 Poush 2050 BS in the Nepali calendar), with the inauguration of its trading floor in Kathmandu’s Singha Durbar Plaza. This marked the birth of Nepal’s secondary capital market, enabling public companies to raise funds through share listings and providing investors a platform to trade.
- 1994: First equity trading session with just 10 listed companies.
- 2006: Introduction of the Securities Act, enhancing regulatory oversight.
- 2010s: Shift to automated Trading Management System (TMS) and mandatory dematerialization (Demat) of securities.
- 2020s: Digital expansion amid COVID-19, with remote trading stations proliferating across 21 cities.
By 2025, NEPSE has weathered economic downturns, including the 2015 earthquake and the COVID-19 pandemic, emerging as a vital engine for capital mobilization in hydropower, banking, and infrastructure sectors.
Organizational Structure and Ownership
NEPSE operates as an autonomous, non-profit entity under the Securities Board of Nepal (SEBON). Headquartered at Singha Durbar Plaza, Kathmandu (coordinates: 27°41′53″N 85°19′12″E), it boasts a paid-up capital of NPR 1 billion (about US$7.35 million as of March 2025). The exchange is governed by a board of directors, chaired by Shovakant Poudel, with CEO Chudamani Chapagain at the helm.
Ownership is dominated by government-linked institutions, ensuring stability but raising questions about independence. The breakdown is as follows:
| S.No | Owner | Ownership (%) |
|---|---|---|
| 1 | Government of Nepal | 58.66 |
| 2 | Nepal Rastra Bank | 9.50 |
| 3 | Employees Provident Fund | 10.00 |
| 4 | Rastriya Banijya Bank | 11.23 |
| 5 | Others (including private entities) | 10.61 |
This structure underscores NEPSE’s role as a semi-public institution, balancing governmental influence with market-driven operations. It employs a network of 92 licensed stockbrokers, who act as intermediaries, and maintains 41 Remote Work Stations (RWS) for nationwide access.
Regulatory Framework and Oversight
NEPSE’s operations are stringently regulated by SEBON, established under the Securities Act of 2006. SEBON licenses brokers, monitors compliance, and enforces investor protection measures, including anti-insider trading rules and disclosure norms. The Securities Listing and Trading Rules (updated 2018) mandate automated electronic trading systems and dematerialized holdings to minimize fraud and errors.
Key regulations include:
- Securities Issuance and Trading Regulations (2025): Tailored for SMEs, allowing easier listings with relaxed criteria like minimum paid-up capital of NPR 10 crore for certain categories.
- Prospectus Requirements: Companies must file detailed prospectuses covering assets, liabilities, management, and financial projections before listing.
- Investor Safeguards: Mandatory Know-Your-Customer (KYC) via the Central Depository System (CDS), and grievance redressal through SEBON’s ombudsman.
To list on NEPSE, companies follow a multi-step process:
- Obtain SEBON approval for the prospectus.
- Apply to NEPSE within seven days of approval.
- Meet criteria: Minimum 300 shareholders, NPR 10-50 crore paid-up capital (sector-dependent), and audited financials for three years.
- Undergo due diligence and pay listing fees (0.2-0.5% of issue size).
- Final allotment and trading commencement.
This framework, while robust, has been criticized for bureaucratic delays, prompting calls for digital streamlining.
Key Indices: Measuring Market Pulse
NEPSE’s indices serve as barometers of market health, with the flagship NEPSE Index being capitalization-weighted and dominated by banking stocks (over 50% weightage). As of September 28, 2025, the NEPSE Index closed at 2,663.51, up 0.43% from the previous session, with a trading volume of NPR 2.93 Arba (29.36 billion).
Other indices include:
- Sensitive Index: Tracks 20 liquid stocks, sensitive to market movements.
- Float Index: Excludes promoter shares, focusing on public float.
- Sensitive Float Index: Combines sensitivity and float adjustments.
Sectoral sub-indices cover 16 categories, aiding diversified tracking. Recent performance (as of September 25, 2025):
| Date | NEPSE Index | Change (Points) | % Change |
|---|---|---|---|
| Sep 28, 2025 | 2,663.51 | +11.51 | +0.43% |
| Sep 25, 2025 | 2,652.00 | -2.35 | -0.08% |
| Sep 24, 2025 | 2,654.35 | -27.89 | -1.03% |
These indices have shown resilience, surging 1.25% post the 2025/26 monetary policy announcement in July, driven by banking sector optimism.
Listed Securities and Sectors
NEPSE lists 272 companies as of July 2025, spanning equities, debentures, mutual funds, and preference shares. All securities are traded in Demat form via CDS, eliminating physical certificates.
The market is segmented into 16 sectors, with Commercial Banks leading (over 40% market cap):
| Sector | No. of Companies | Market Share (%) |
|---|---|---|
| Commercial Banks | 26 | 45 |
| Hydropower | 45 | 20 |
| Development Banks | 17 | 10 |
| Microfinance | 25 | 8 |
| Life Insurance | 18 | 5 |
| Others (Hotels, Manufacturing, etc.) | 121 | 12 |
Top 10 companies by market value (as of May 2025, in NPR billion):
| Rank | Company | Market Value |
|---|---|---|
| 1 | Bishal Bazar | 225.4 |
| 2 | Nepal Reinsurance | 170.5 |
| 3 | Nepal Telecom | 158.3 |
| 4 | Nabil Bank | 134.7 |
| 5 | Citizen Investment Trust | 124.4 |
| 6 | Himalayan Reinsurance | 101.7 |
| 7 | Global IME Bank | 89.59 |
| 8 | Everest Bank | 84.2 |
| 9 | Nepal Investment Mega Bank | 73.9 |
| 10 | Hydroelectricity Investment | 72.4 |
Hydropower and banking dominate due to Nepal’s renewable energy push and financial liberalization.
Trading Mechanism and Hours
NEPSE employs an automated TMS for order-driven trading, supporting limit, market, and stop-loss orders. All trades occur electronically via broker platforms or RWS, with real-time matching.
Trading hours are 11:00 AM to 3:00 PM NPT (Nepal Standard Time), Monday to Friday, excluding public holidays like Dashain (which paused trading until September 28, 2025). Pre-open (10:15-11:00 AM) and post-close sessions handle order entry and disclosures.
Investors start trading by:
- Selecting a licensed broker (e.g., from NEPSE’s list of 92).
- Opening a Demat and trading account with KYC.
- Depositing funds via bank transfer.
- Placing orders online or in-person.
Circuit breakers (5-10% daily limits) prevent volatility, and odd-lot trading accommodates small investors.
Settlement Process
Settlement follows a T+2 cycle since 2023 reforms: Trades executed on Day T settle by Day T+2, with funds and securities transferred via CDS and Nepal Rastra Bank. This reduces counterparty risk compared to the prior T+3 system. Pay-in/pay-out occurs at 2:00 PM on settlement day, with penalties for defaults.
Investor Participation and Market Depth
Over 5 million Demat accounts exist as of 2025, with retail investors (80% participation) driving volume. Foreign investment is capped at 20-30% per sector under FDI policies. Monthly trading exceeds 804 million units, but liquidity remains a concern—average daily turnover is NPR 5-7 Arba.
Brokers facilitate access, with apps like TMS Mobile enabling seamless trades. Investor education via SEBON workshops has boosted participation, especially among youth.
Market Performance and Recent Statistics
As of September 28, 2025—the last trading day before Dashain—the NEPSE Index gained 0.43% to 2,663.51, with turnover at NPR 2.93 Arba. Year-to-date, the index is up 15%, buoyed by monetary easing and hydropower IPOs like SY Panel Nepal’s (deadline September 26).
Market cap: NPR 465,698.5 crore. However, September’s Gen Z-led protests halted trading from mid-month due to vandalism and technical glitches at CDS, resuming on Ashwin 2 (September 18). This volatility underscores external risks.
Challenges and Recent Developments
NEPSE grapples with:
- Low Liquidity and Depth: Dominated by a few sectors, leading to price manipulations.
- Political Instability: 2025 protests disrupted operations, eroding confidence.
- Technological Gaps: Frequent outages; response includes a new data center tender (August 2025).
- Regulatory Hurdles: Lengthy listings deter SMEs.
- Investor Awareness: Limited financial literacy amid economic pressures like 6-8% inflation.
Recent developments:
- IPO Surge: Over 20 allotments in 2025, including Sagar Distillery (September 27).
- Insurance Sector Reforms: Extended share auctions (September 21).
- Protest Aftermath: Trading resumed post-September 17, with SEBON directing in-person insurance probes.
Future Prospects
Analysts forecast moderate 2025 growth (10-15% index rise), tempered by global headwinds. Key initiatives:
- Derivatives Introduction: Options and futures by 2026 to hedge risks.
- Second Exchange Debate: Proposals for a parallel platform to boost competition.
- Digital Upgrades: Blockchain for settlements and AI-driven surveillance.
- SME Focus: Relaxed rules under 2025 regulations to list 100+ new firms.
With Nepal’s hydropower boom (target: 10 GW by 2030) and tourism rebound, NEPSE could double market cap by 2030, attracting FDI.
Conclusion
The Nepal Stock Exchange embodies the nation’s economic aspirations, bridging savers and entrepreneurs in a resource-constrained landscape. From its humble 1994 origins to a NPR 34 billion powerhouse in 2025, NEPSE has fostered growth while navigating turbulence. Yet, addressing liquidity, tech resilience, and inclusivity will unlock its potential. For aspiring investors, starting with a Demat account offers entry to this dynamic market—research thoroughly, diversify, and stay informed via official channels like sharesansar.com or nepalstock.com. As Nepal marches toward middle-income status, NEPSE remains its beating financial heart.