The NEPSE Index represents the overall performance of companies listed on the Nepal Stock Exchange. It shows whether the market is moving upward or downward and serves as the main benchmark for Nepal’s stock market.
What Is the NEPSE Index?
A stock market index measures the general condition of a stock exchange. It indicates whether prices are rising or falling and gives a clear view of market direction.
The NEPSE Index, published by the Nepal Stock Exchange since 1993 (2050 B.S.), serves this purpose in Nepal. Similar indices exist globally — such as Sensex and Nifty in India, FTSE in London, Nikkei in Japan, and S&P in the United States.
When the share prices of most listed companies rise, the index increases. When prices fall, the index decreases. In essence, the NEPSE Index is an average figure that represents the overall movement of the stock market.
How the NEPSE Index Is Calculated
The NEPSE Index is calculated based on the market capitalization of all listed companies as of the base date, Magh 30, 2050 B.S.
Market Capitalization Formula:
Total Listed Shares × Current Market Price
Since it is based on market capitalization, the NEPSE Index is a value-weighted index. Larger companies with higher market capitalization have a greater impact on the index, while smaller companies have a smaller influence.
Types of NEPSE Indices
To analyze the market from different perspectives, NEPSE also publishes several other indices:
1. Sensitive Index
The Sensitive Index includes only financially strong, transparent, and well-governed companies that meet NEPSE’s criteria.
To qualify, a company must have:
Minimum paid-up capital of Rs. 20 million
At least 1,000 shareholders
Profitable for at least three consecutive years
Book value equal to or greater than the paid-up value
Submitted audited financial statements within six months of fiscal year-end
NEPSE started publishing the Sensitive Index on Poush 17, 2063 B.S.
2. Float Index
The Float Index measures market performance based only on publicly tradable shares — those that can be bought or sold immediately in the market.
It uses the base-year price and current market price of such tradable shares to calculate performance.
NEPSE launched the Float Index on Bhadra 30, 2065 B.S., covering around one-third of all listed shares.
Although it is considered more realistic, the Float Index has not gained wide popularity in Nepal.
3. Sensitive Float Index
This index combines both concepts — it includes only financially strong companies (from the Sensitive Index), but considers only their publicly tradable shares.
NEPSE started publishing the Sensitive Float Index on Bhadra 30, 2065 B.S.
Formula for Calculating the NEPSE Index
The NEPSE Index is calculated using this simple formula:
NEPSE Index = (Current Market Capitalization ÷ Base Period Market Capitalization) × 100
Example:
Current Market Capitalization = Rs. 50,00,000
Base Market Capitalization = Rs. 10,00,000
Calculation:
(50,00,000 ÷ 10,00,000) × 100 = 500
So, the NEPSE Index value in this example would be 500.
Adjusting for Corporate Actions
Corporate actions such as bonus shares, rights issues, mergers, and acquisitions can affect the total market capitalization. To ensure the index reflects the true market movement, NEPSE adjusts its base capitalization using the following method.
Formula:
New Adjusted Base Capitalization = (New Market Capitalization after Corporate Action ÷ Old Market Capitalization) × Old Base Capitalization
Example:
Current Market Capitalization = Rs. 50,00,000
Added Capitalization (due to new shares, etc.) = Rs. 10,00,000
Old Base Capitalization = Rs. 10,00,000
Step 1:
New Market Capitalization after Corporate Action = 50,00,000 + 10,00,000 = 60,00,000
Step 2:
New Adjusted Base Capitalization = (60,00,000 ÷ 50,00,000) × 10,00,000 = Rs. 12,00,000
Step 3:
Now, the new NEPSE Index will be:
(60,00,000 ÷ 12,00,000) × 100 = 500
This adjustment keeps the index consistent even after corporate events.
Why the NEPSE Index Matters
The NEPSE Index is regularly updated to reflect real-time market movements and corporate actions. Since its base date (Magh 30, 2050 B.S.), the index has served as the primary indicator of Nepal’s stock market performance.
It provides investors, analysts, and policymakers with a clear picture of how the overall market — and particularly large-cap companies — are performing over time.
Also Read: Hidden Costs in Nepal’s Share Market: How Much You Actually Pay in Fees and Tax