All Preparations for 'NEPSE 30 Index' Complete; Operational Date to be Set by BOD Meeting To Be Potentially Held Next Week

via new business age

The Nepal Stock Exchange (NEPSE) has finalized all preparations for the launch of the 'NEPSE 30 Index'. The management of NEPSE has confirmed that all necessary preparations have been completed to commence the operation of the NEPSE 30 index.

According to NEPSE spokesperson Murahari Parajuli, the only remaining task is for the board of directors to determine the operational date for the index.

Once the date is set by the meeting of the Board of Directors (BODs) which will most probably be held next week, the index will be implemented accordingly, as stated by spokesperson. 

Parajuli mentioned that all management-related work has been completed.

NEPSE had requested suggestions on NEPSE 30, with a deadline until Baisakh 20. The suggestions received have been incorporated into the implementation plans for NEPSE 30.

What is NEPSE 30?

NEPSE is developing the NEPSE 30 index as a value-weighted index based on market capitalization, including free-float shares in the market. The purpose of this index is to facilitate the development, operation, and management of indices, thus strengthening secondary market transactions. NEPSE expects the NEPSE 30 index to accurately reflect market transactions, fluctuations, and assist in the operation of derivative trading instruments, portfolio management, exchange-traded fund operations, and more. NEPSE believes that this will introduce new dimensions to secondary market transactions and provide investors with more tradable instruments in the future.

The NEPSE 30 Index will consist of a separate index comprising 30 companies. The following criteria have been established for the selection of companies:

(a) The book price per share is higher than the paid price per share, and the company has achieved net profit in at least three out of the last five financial years, including the most recent one.

(b) The Earnings Per Share (EPS) in the previous financial year is at least 10 percent of the paid price and exceeds the annual inflation rate of the same year.

(c) The company has issued at least 25 percent of its shares to the general public, or its free-float market capitalization represents more than one percent of the total free-float market capitalization.

(d) The company has a minimum of 20,000 shareholders.

(e) The average daily traded value is at least NPR 25 lakhs over the past six months, with an average of 5,000 shares traded daily and at least 40 trades conducted daily.

(f) Trading has occurred on at least 75 percent of the available trading days during the last six months.

The index calculation method is as follows:

1. Prepare an initial list of companies selected based on the above criteria.

2. Assign weights to each listed organization based on free-float market capitalization, last year's earnings per share, transaction amount, number of transactions, and transaction share, as shown in the example provided (on the next page). Calculate the total weight (Composite Weight) based on these factors.

3. Classify the listed organizations into six sectoral groups: banks and financial institutions, microfinance, insurance, hydroelectricity, manufacturing, and trade and services. Within each group, calculate the total weight (Sectoral Composite Weight) of the individual companies according to the method described in point 2. Select eight companies with the highest weight from each group. If there are fewer than eight organizations in a group, select all available organizations.

4. If the number of organizations selected according to point 3 exceeds 30, remove 30 companies based on their total weighted scores using the method from point 2. Ensure that at least one organization from each group remains after the removal.

5. If the number of organizations selected according to point 3 is fewer than 30, select no more than eight companies from each group. Calculate the total weight of all listed companies using the method from point 2 and add the company with the highest weight to reach a total of 30 companies.

For the calculation of this index, NEPSE will take the base market capitalization date as Poush 30th, 2079. NEPSE plans to rebalance this index annually on the last Friday of Bhadra and the last Friday of Falgun.

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