Hydropower vs Energy Index: Why SEBON Must Act Now?

Nepal’s “Hydropower Index” Is Becoming Too Narrow for the Energy Story

Nepal’s capital market is quietly drifting into a classification problem—and investors are paying the price in blurred signals.

The Hydropower Index was built for a market where “energy” largely meant hydropower. That world is changing. New energy-related companies—beyond the classic run-of-river hydropower model—are entering (and preparing to enter) NEPSE. Yet several of them are being pushed into the catch-all “Others” bucket, where sector meaning goes to die.

If Nepal’s energy economy is diversifying, why is the market’s indexing architecture still stuck in a hydropower-only frame?

The core issue: indices are value-weighted, so classification is not cosmetic

NEPSE indices are value-weighted (market-capitalisation-based). In simple terms, bigger companies move the index more.

That means sector classification is not just a label—it is the foundation for:

• sector rotation decisions,
• benchmarking (fund managers vs “hydropower”),
• macro narratives (“energy is leading / lagging”),
• and retail sentiment.

NEPSE also runs multiple sector sub-indices, including the Banking, Development Bank, Finance, HydroPower Index and Others Index.

When an energy company is placed in “Others,” its price action begins influencing a sector index that has nothing to do with energy—while the Hydropower Index misses that growth.

Exhibit A: Pure Energy is listed, but classified as “Others”

Pure Energy Limited (PURE) is already listed—yet it is officially tagged under the “Others” sector.

This is not a minor bookkeeping choice. It creates two practical problems:
1. The “Others Index” becomes noisier. “Others” is meant to hold everything that does not fit. Add energy names to that mix and the index becomes even less interpretable—an index that can rise on energy optimism one week and fall on unrelated scripts the next.
2. The Hydropower Index under-represents energy momentum. Investors tracking “energy” end up tracking “hydropower,” and missing the broader transition.

The pipeline is sending the same signal: more energy names, same ‘Others’ bucket SEBON’s own IPO approval list shows Jhapa Energy Limited approved under the sector “Others.”

ShareSansar also reported SEBON’s IPO approval for Jhapa Energy.

So, the pipeline is not just bringing more energy scripts—it is bringing more sector ambiguity.

And this is where the market gets distorted—not because the NEPSE Index itself is “wrong,” but because the sector tools investors rely on become less accurate.

Why this matters to investors: sentiment, transparency, and false narratives

Investors do not buy “a company.” They also buy a story: sector tailwinds, policy direction, and thematic growth.

Misclassification produces three harmful outcomes:

• False sector signals:
  “Hydropower is weak” may actually mean “hydropower is weak, but other energy is strong.” The index cannot tell you that.
•  Mispriced risk:
  Hydropower has specific risks (hydrology, PPA terms, construction execution). Non- hydro energy businesses may have different risk drivers. Blending them incorrectly makes sector risk analysis sloppy.
•  Reduced transparency:
  The market’s structure should clarify the economy. When it fails, investors fall back on rumors and groupthink—never a healthy foundation for capital formation.

The regulator question: who should fix this—NEPSE or SEBON?

NEPSE calculates sector indices, while SEBON regulates and systematizes securities markets and issues directives and licensing for market institutions.

In practice, both will be part of any meaningful reform. So here are the questions the market should ask—openly:

•  What rulebook is being used to classify a company as “Hydropower” vs “Others”?
•  If “energy” is evolving, why is the index framework not evolving with it?
•  Who owns the accountability for sector taxonomy: NEPSE, SEBON, or both?

Two workable solutions (SEBON/NEPSE should choose one—fast)

Option 1: Rename the Hydropower Index to an “Energy Index.”

Pros: simple, intuitive, aligns with the new pipeline.

Risk: hydropower may still dominate, and investors may lose a clean “pure hydro” benchmark.

Option 2: Create a dedicated “Energy Index” and keep Hydropower as a sub-index.

Pros: best of both worlds—clean hydro benchmarking and a modern energy lens.

Implementation idea: reclassify PURE and similar scripts into Energy; keep hydropower- only names in Hydropower.

If Nepal wants to tell a credible energy growth story, it needs credible market structure to match.

Bottom line: better indexing is investor protection

This is not a branding debate. It is a transparency issue.

Nepal is pushing for more public listings and more sector diversification. But if new energy scripts keep landing in “Others,” investors will be left tracking the wrong dashboard.

Proper indexing will not only sharpen sector analysis—it can increase investor confidence, improve price discovery, and help capital flow to the right parts of Nepal’s evolving energy economy.

The energy sector is expanding. The market’s index system should stop watching it through a hydropower-only lens.

Author Bio

Kriti Jha is an investor and the founder of PrimeTrust Investments, a finance-focused platform that simplifies Nepal’s economy, banking, market developments and company analysis for general audiences. He writes data-backed, practical explainers that connect macro headlines with everyday financial realities.