Basic Stock Market Terms in Nepal


1. Dividend / Bonus Share

Dividends are the returns paid to its shareholders from the profits earned by the company. If such dividend is paid in cash then it is called cash dividend and if it is paid in shares it is called bonus share or stock dividend. In order to capitalize the savings or reserve fund of the company, additional shares (bonus shares) are thus provided to the existing shareholders or the paid up capital is increased. The amount of dividend is decided by the board of directors.

2. Warrent

A warrant is a securities instrument issued to purchase ordinary shares at a specified number and price at a given time. In other words, a warrant is a right given to investors to buy ordinary shares of a company in the future. Generally, warrants are issued along with bonds to make the issuance of bonds attractive to investors. In the future, investors are free to decide on the option of buying or not taking ordinary shares using Warrant. Exercising, it turns into ordinary shares, but bonds remain the same. The issuance of a warrant discloses the price to be paid for the purchase of ordinary shares in the future (Exercise Price), the ratio of ordinary shares to be obtained using the warrant (Exercise Ration) and the expiry date of the warrant. Its a basic stock market terms.

3. Blue Chip Share

Blue chip shares are the shares of an organization that have been earning profits for a long time by efficiently managing the organization and paying dividends to the investors as well as winning the trust of the investors by being aware of the accountability towards the investors. Most of these types of stocks have a high value and the dividends are moderate.

4. Stock Broker

A securities dealer who buys and sells securities on behalf of a customer is called a securities broker.

5. Merchant Bank

Merchant Bank is an organization that manages the primary issuance of securities, guarantees and collects applications and details for securities trading.

6. Securities Dealer

A securities trader is a person who buys all or some of the securities issued in the primary market and sells them through the stock market and manages the investment by entering into an investment agreement with the customer. A securities dealer buys and sells securities through a customer or a securities broker in his own name.

7. Market Maket

A market maker is an institution that buys and sells securities in its own name for the purpose of providing liquidity in debentures or collective investment schemes or listed securities issued on the securities of the Government of Nepal.

8. Share Registrar

An organization is responsible for keeping records of securities transactions of the organizations and for taking care of all the work related to rejecting or registering the filings and updating the information of the shareholders.

9. Central Depository System of Securities

The central depository system of securities is a system that enables all the securities holders to take care of the securities and complete the process of purchase and sale record, transfer, transfer etc. in a simple and quick manner. Securities holders can open an account by depositing their securities under this system just like depositors keep money in a bank. This system eliminates problems such as loss of securities, loss, theft, issue of counterfeit shares. This system also helps reduce transaction costs.

10. Underwriting

If there is no sale of securities to be issued in the primary market, the agreement to buy such securities is called securities guarantee.

11. Prospectus

Before issuing securities in public, the concerned organization should publish the statement. The prospectus discloses the details related to the organization that wants to issue the securities and helps the investors to decide whether to invest in the securities of the respective organization or not based on the said details.

12. Over Subscription and Under Subscription

The demand for more securities is called high demand for securities and the low demand for securities is called low demand for securities. In case of high demand for securities, there is an arrangement to distribute the securities by giving more burden to the group demanding less and less to the group demanding increasing amount of securities.

13. Premium

The difference between the issue price and the face value is called premium. The issuance of securities at a price higher than the face value of the securities is called securities issuance in Premium.

14. Bid and Offer Price

The value of the securities that a potential buyer wants to pay is called the offer price. The purchase and sale of securities is completed after receiving the bid price / offer price marked by the securities brokers on the trading board of the securities market.

15. Paid up Value

The sum of the value of the listed securities paid by all the securities holders is called the paid up value of the securities.

16. Market Capitalization

Market capitalization is the sum total of the market value of all securities listed on the stock exchange. Market capitalization is obtained by multiplying the number of securities listed in the market and their respective market value.

17. Market Index

The market indicator is the ratio between today’s total market value of listed securities and the total market value of a base year. This indicator increases when the value of listed securities increases and decreases when it decreases. Nepal Securities Exchange Market Ltd. in Nepal. Each day generates this type of indicator, called the NEPSE Index.

18. Market Price Per Share

The market value per share is called the market price per share.

19. Earning Per Share

Earnings per share is obtained by dividing the company’s net profit by the total number of shares of the company. Earnings per share provide a significant measure of profit for shareholders and individuals outside the company. A company with rising earnings per share is considered to be successful in performance while declining earnings per share is considered a sign of problem.

20. Net Worth

The total value of the company’s paid-up capital and total reserves is the company’s net worth. Dividing the net worth by the total number of shares of the company gives the net worth per share or the book value of the shares.

21. Price Sensitive Information

Price-sensitive information is the announcement made by a company regarding dividend distribution or bonus share issue, change of management, expansion plan, financial quantities, important agreements with other parties and events directly affecting the value of securities and other information.

22. Insider Trading

As per the rules, the securities are to be made public to the investors of the company but the securities have not been made public. This type of transaction is prohibited by the prevailing system.

23. Bear Market and Bull Market

Bull market refers to the gradual emergence of a market. In this type of market, along with the improvement of every sector of the economy including industry, banking, insurance, the company’s profits have gradually increased due to efficient management. At this time the share price of listed companies is higher. On the other hand, bear market refers to the downturn in the market. In this situation, the market value and market index of listed securities are on a downward trend and there is an atmosphere of frustration among investors.

24. Directors and Board of Directors

The people who are responsible for managing the entire business of any company, exercising their rights and fulfilling their duties are the directors of the company. The directors of the company are appointed by the founders until the first annual general meeting and then by the general meeting. In order to be the operator of any company, one has to take the shares as prescribed in the rules of that company.

25. Annual General Meeting

The annual general meeting of the shareholders is called by the company every year to inform the shareholders about the work done by the company during the year, achievements, problems and future plans as well as to approve the annual accounts of the company, appoint an auditor and approve other important issues. According to the prevailing rules in Nepal, such a meeting has to be convened within six months of the end of each financial year.

26. Proxy

A representative is a person who has not been able to attend the annual general meeting of the company in person and has given the right to vote by signing a petition in the prescribed format. A shareholder of any company can only nominate another shareholder of the same company as a representative.


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