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Know how rupees increment in the price of listed companies affects NESPE index movement (Exclusive Study)

- ShareSansar, May 16, 2017  on Company Analysis , Exclusive , Featured , Financial Analysis , Latest , Stock Market
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The overall stock market of Nepal is solely reflected by NEPSE Index. When the NEPSE index rises, investors understand that the price of listed companies rises and vice versa. But can we generalize that the effect of price rise of every listed companies is same while calculating NEPSE Index?

NEPSE Index is calculated based on its overall value (market capitalization) of all listed companies and the market capitalization is calculated by multiplying the number of listed shares of an individual company with its latest market price. Here, we can understand that NEPSE index is dominated mainly by the companies with highest market capitalization and highest listed shares.

NEPSE Index = (Latest Market Capitalization/Base Period Market Capitalization) * 100

Where, Latest Market Capitalization = Rs. 1928044.96 Million

Base Period Market Capitalization = Rs 116201.18 Million

Base Index Value = 100

Now, let’s see how the rise in price of each listed companies’ affect the NEPSE Index (the calculation is based on 2017/05/16 price).

High Effect

high

Above are the major companies whose price movement have highest effect on NEPSE Index movement.

NTC has the highest amount of listed shares, so an increment of Rs 10 in the price of NTC will move the index upward by 1.29 points. If there is an increment of Rs 100 in the price of NTC, then the index will rise by 12.9 points. If there is an increment of Rs 1, the index gains 0.129 points.

HIDCL has the second highest amount of listed shares in NEPSE. If the price of HIDCL increases by Rs 10 then the index will hike by 0.86 points.

Least Effect

low

Above are the companies which have very less effect on movement of NEPSE Index.

This clearly indicated that NEPSE index calculation is largely dominated by big companies like Nepal Telecom, HIDCL and most of the commercial banks and few big Hydro companies and there is very less effect of companies with low capital (listed shares) on NEPSE Index calculation.

(This study does not cover all the listed companies being traded at NEPSE)

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