May 4: Nepal Stock Exchange (NEPSE) is all set to introduce a separate index 'NEPSE-30 Index’.

According to NEPSE, the new index will be released for the development, operation and management of the secondary market. It will help strengthen the secondary market transactions.

According to Murahari Parajuli, the spokesperson of NEPSE, preparations are being made to publicize the NEPSE-30 Index within a short time after taking suggestions from various stakeholders.

"We will take suggestions about the NEPSE-30 Index from various stakeholders and experts by May 19. If there are suggestions that can be implemented and should be addressed, this index will be launched soon by addressing those issues," said Parajuli.

NEPSE issued a notice on May 3 and asked for opinions and suggestions from stakeholders on the proposed NEPSE-30 Index. It is said that the NEPSE-30 Index will be formulated as a market capitalization-based (value-weighted) index by including immediately tradable (free float) shares in the market.

According to NEPSE, this index will reflect the market transactions and fluctuations and help in the operation of fixed-term trading instruments of derivative nature, portfolio management, Exchange Traded Fund (ETF) operations, etc.

"The NEPSE-30 Index will add a new dimension to the secondary market transactions, and investors will get more tradable tools in the future," NEPSE said, "The calculation method of this index, which has long-term importance, and the method of selecting the listed organizations to be included in it, need to be made transparent and reliable." 

The basis for the selection of listed organizations for inclusion in the proposed NEPSE-30 Index has also been specified.

“The book value per share should be higher than the paid price per share and the company with at least three years of net profit including the last fiscal year out of the last five fiscal years will be considered eligible to be in the NEPSE-30 Index," NEPSE said through a notice.

Similarly, to be listed in such an index, at least 25 per cent of the shares of the company should be issued to the general public or the free-float market capitalization of the related company should be more than one per cent of the total free-float market capitalization. Companies having at least more than 20,000 share members, with an average daily turnover of Rs 2.5 million or more during the last six months will be considered eligible to be included in the NEPSE-30 Index.

Previously, there was a discussion to bring the NEPSE-50 Index, but NEPSE decided to release the NEPSE-30 Index. Investors will get mainly three benefits from this index. First, it will show the real market situation. Secondly, NEPSE-30 can be traded as a security in itself, and thirdly, it is considered to support passive mutual funds.

While NEPSE is preparing to implement NEPSE-30, it is not clear whether it can create an environment for its implementation or not.

Investors expect a certain percentage of profit (dividend) while investing in NEPSE, but investors who invest in the NEPSE-30 Index do not expect profit. Its profit and loss are determined based on the transaction itself.

Therefore, it is not clear whether the market is ready to invest in such an index or not. The market can only use this index as an 'investment tool'. Similarly, the company's technical analysis does not work on this index. It deals with speculation.

When the NEPSE-30 Index is released, it will increase the work of NEPSE because it will have to look over data analysis and business regulation.