NEPSE Approves Index Development Procedure; Paves Way for NEPSE 30

Sep 12, 2023 03:57 PM Merolagani

Nepal Stock Exchange (NEPSE) has approved ‘Internal Procedure related to Nepal Stock Exchange Ltd Index Development, Operation and Management, 2080’.

As per Murahari Parajuli, a BOD meeting of NEPSE held on September 11 approved the work procedure.

With this, NEPSE has paved the way to implement NEPSE 30 in the domestic secondary market.

As per the procedure, companies are required to fulfill certain criteria in order to be included in NEPSE 30. The criteria mention that the companies that have earned profit for at least 3 years in the last five years and their EPS remains at least 10 percent or more than face value in the previous FY are eligible for the index.  

Similarly, companies that have at least 25 percent public ownership and whose free float market capitalization is at least one percent of total free-float market capitalization will be included in the index.

Parajuli added that companies with higher book value than face value, minimum of 75 percent trading days in the last six months and at least 10 percent total free float number of shares in the given date of rebalancing in the last six months can participate in NEPSE 30.

Moreover, the procedure states that all criteria should be met while determining NEPSE 30. NEPSE will prepare an initial list of selected companies. then NEPSE will select the first 30 companies based on the free float market capitalization of the listed companies. if the first 30 companies include at least one company from one sub-index group it will be considered the last list.

If the list of the first 30 companies does not include any company from any one group, then one company which have lowest market capitalization will be excluded and the company with the highest market capitalization of the unmet group within the preliminary list will be included in the list. However, if the preliminary list does not include any name from the group it will not be mandatory.

If NEPSE fails to list 30 companies in the preliminary list, then the companies that fulfill EPS criteria and with maximum market capitalization will be included in the last 30. NEPSE shall ensure that at least one company from one group is there in the list.

For the index, the listed companies shall be divided into Banks, Financial Institutions (Development Banks and Finance Companies), Microfinance Companies, Insurance, Hydropower, Productive and Service Sector, and Others.

 In order to determine the index, the free float market capitalization of 2079 Poush 30 will be taken as a base. Similarly, the NEPSE 30 Index will be rebalanced every year on the last Friday of Bhadra and the last Friday of Falgun.

 

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