Nepse stance betrays real market

Market capitalisation has increased to Rs 5.83 trillion — from Rs 4.14 trillion, a hike by Rs 1.69 trillion at closing of this week’s trading — after Nepal Telecom’s shares started trading in Nepal Stock Exchange Ltd (Nepse). But, it is high time Nepse changed its traditional system of calculation of market capitalisation because that does not reflect the capital market.
Market capitalisation swelled not because the trading increased, but due to traditional method of calculation. Nepse listed 15,00,00,000-unit of Nepal Telecom (NT) shares but tradable shares are only slightly more than 53,2000-unit. If there is a hike of Rs 10 per unit share, then the total market capitalisation will increase by Rs 15 million in a day, which is not real.
The remaining unit of shares that the government holds at present should not be counted in the real market capitalisation. Either the government should also start selling its shares at Nepse or Nepse should calculate only tradable NT shares for realistic market capitalisation. The government can also sell its remaining unsubscribed shares at Nepse.
This week also witnessed unreal phenomenon as the number of companies trading shares and amount transacted decreased, Nepse registered a gain of 57.41 points to 1119.65 points from last week’s closing of 1062.24 points. But the sensitive index lost 24.51 points.
Nepse index itself is yet another problem that needs a rethink. Does Nepse reflect national economy is the question haunting every economist. Thus, the floating index — after real market capitalisation system — is yet another need of the hour to make the capital market realistic.
Although Nepse opened in the red on Sunday, the other three days it continued on a growth path, except for Wednesday when it shed marginal points. On Sunday, it plunged by 5.88 points to 1057.36 points from last week’s closing of 1062.24 points. On Thursday, the market gained 33.46 points to 1119.65.