Know how the rupees increment in listed companies’ effect the NESPE Index (Exclusive Study)
Wed, Jun 22, 2016 4:00 PM on Latest, Exclusive, Featured, Stock Market,
The overall stock market of Nepal is solely reflected by NEPSE Index. When the NEPSE index rises, investors understood 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 listed share of individual company with its latest market price. Here we can understand that NEPSE index is dominated mainly by the companies with highest market capitalization.
Now, let’s see how the rise in price of each listed companies’ effect the NEPSE Index( the calculation based on 2016/6/21 price.)
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 1.40 points. If there is an increment of Rs 1000 in the price of NTC then the index will rise by 139.84 points.
Nepal Investment Bank Limited (NIB) has the second highest amount of listed shares in Nepse. If the price of NIB increases by Rs 1000 then the index will hike by 59.16 points.
Even if the price of Life Insurance Corporation Nepal (LICN) increases by Rs 1,000 then the Nepse index will only increase by 9.97 points.
This clearly indicated that NEPSE index calculation is largely dominated by big companies like Nepal Telecom and most of the commercial banks and few big Hydro companies and there is very less effect of companies with low capital (listed share) on NEPSE Index calculation.
(This study does not cover all the listed company being traded at Nepse).
High Range
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 1.40 points. If there is an increment of Rs 1000 in the price of NTC then the index will rise by 139.84 points.
Nepal Investment Bank Limited (NIB) has the second highest amount of listed shares in Nepse. If the price of NIB increases by Rs 1000 then the index will hike by 59.16 points.
Even if the price of Life Insurance Corporation Nepal (LICN) increases by Rs 1,000 then the Nepse index will only increase by 9.97 points.
Mid Range
Low Range
As the number of listed shares of Rural Microfinance Development Centre Limited (RMDC) is very less compared to other listed companies in the market. If the price of RMDC increases by Rs 1000 even then the Index will increase by meager 5.86 points.
This clearly indicated that NEPSE index calculation is largely dominated by big companies like Nepal Telecom and most of the commercial banks and few big Hydro companies and there is very less effect of companies with low capital (listed share) on NEPSE Index calculation.
(This study does not cover all the listed company being traded at Nepse).
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