Deck cleared for the launch of the ‘Nepse 30’ Index operation

The way has been paved for the Nepal Stock Exchange (Nepse) to initiate the operation of the ‘Nepse 30’ index. The Nepse board meeting on Monday endorsed the procedures formulated for the launch of the ‘Nepse 30’.

Murahari Parajuli, a spokesperson for the Nepse, commented, “The board of directors meeting on Monday approved the Internal Procedures for the Development, Operation, and Management of the Nepal Stock Exchange Limited Index, 2080.”

Following the approval of the procedure, the board meeting also made the decision to establish a committee responsible for implementing it. Nepse has stated that this procedure will serve as a guiding framework for the operation and management of a variety of indices, both presently in operation and planned for the future.

The implementation committee will advance the preparations and oversee the operational and managerial aspects of the ‘Nepse 30’ index. Furthermore, it will propose a specific date for the commencement of the ‘Nepse 30’ index’s operations.

Having received approval for the procedure, Nepse is now in high gear to introduce the new stock trading index, ‘Nepse 30’, in less than a month. The ‘Nepse 30’ could be up and running as early as the first week of October, said officials.

Currently, the ‘Nepse 30’ index is undergoing internal testing. This testing phase, initiated on July 25, has confirmed the feasibility of operating the ‘Nepse 30’ index.

Nepse envisions the ‘Nepse 30’ as an index formed by tracking the share trading activity of 30 carefully chosen companies. This new index will consist of the leading 30 companies that meet the specific criteria established by Nepse from among all the companies listed on its platform.

It is important to note that ‘Nepse 30’ will not be an independent index. Currently, Nepse comprises 13 sub-indices, including sensitive, float, and sensitive float indices. Nepse’s plan involves the inclusion of companies from six distinct sectors, such as banks and financial institutions, microfinance, insurance, hydropower, manufacturing, and trade and services, within the ‘Nepse 30’ index. Each sector will be represented by at least one company and may have a maximum of eight companies included in the index.

To be eligible for inclusion in the ‘Nepse 30’, companies must meet specific requirements, such as demonstrating profitability over the previous three years, maintaining earnings per share (EPS) exceeding 10 percent of their paid-up capital, surpassing the inflation rate with their EPS, and additionally, having allocated a minimum of 25 percent of their shares to the public while boasting a shareholder base of no less than 20,000 individuals.

Likewise, companies must exhibit a daily turnover averaging at least 2.5m over the preceding six months and engage in daily share trading of no less than 5,000 units.

Nepse has announced its intention to introduce the ‘Nepse 30’ with the objective of enhancing the development, operation, and management of indices in order to bolster activity within the secondary market.

The ‘Nepse 30’ index will be structured as a market capitalization-based index, incorporating immediately tradable (free float) shares.

Previously, Nepse had plans for the ‘Nepse 50’ index, but it opted for the ‘Nepse 30’, citing potential challenges associated with managing 50 companies.

The procedure outlines specific criteria for categorizing companies selected for the development of the new index based on their minimum paid-up capital. In accordance with these criteria, companies with a paid-up capital of Rs 5bn will fall into the A category, while companies with a paid-up capital of Rs 3bn will be categorized as B class.