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  NEPSE Index: What it is and What it is not!!
Saturday - 26th January, 2008 | ResCon		  
 

NEPSE index is an indicator of how the market has grown since the base year; NEPSE index is calculated taking base year of 1994. A stock market index is a listing of stocks and a statistical reflection of composite value of all its components. It is sort of a benchmark of activities, performance and any evaluation. It is a tool to represent the characteristics of the component stocks trading in the NEPSE. This index is developed to answer the million dollar question: How is the market doing and how will it shape?

Economists and statisticians use NEPSE index to study long-term growth patterns in the economy, to analyze and forecast business-cycle patterns. Investors use the index to evaluate the performance of their own portfolios. Fundamental and technical analyst’s decisions to buy or sell shares generally depend on the market index, its patterns and performance.

In simple, if NEPSE index is increasing, market is in bullish trend, investors’ confidence is increasing in the market and overall it is a good signal for the financial market. However, if the index is decreasing, market is considered to be in bearish trend and overall it shows that the market is not performing well.

IS NEPSE INDEX THE TRUE ECONOMIC INDICATOR OF NEPAL?

As observed among listed companies in NEPSE, Financial institutions and Banks are actively involved in trading of the stock whereas, stock value of industries are quite low and are not traded in bulk as compared to that of financial institutions and banks. Highest Share value is also against the name of the bank. As we know that, industries play very important role in the economy of any country, as they create real wealth, they should be actively involved in the market and that their share price should have been high. But, financial institutions and Banks are just mobilizing the existing wealth. They are not creating it. So, NEPSE Index, which is heavily biased by excessive share trading of financial institutions and banks, is not showing the correct information about the true economic status of Nepal.

 
 
 

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