In order to enter the stock market, investors must be at least aware of the provisions related to the financial market, stock market and stock trading. Some people get involved in stock trading without understanding the generalities of the market and follow the whims and fancies of their friends. Eventually, they blame the stock market for not being able to book their profit at the right time.
Let’s discuss some important information about the financial market securities market and stock market trading.
The market for buying and selling financial instruments is called a financial market. Any organization or company needs short-term and long-term capital depending on the nature of investment for which they issue different types of securities. The market for buying and selling such securities is a financial market. Yes Securities here include shares, debentures, pre-emptive shares, dredging wills, etc., also known as financial assets. Based on the nature of transactions, the financial market can be divided into two parts, the primary market, and the secondary market.
Primary Market: The market where the securities are issued for the first time by any company to meet its financial needs is called Primary Market. Shares issued in this type of market are called IPO (Initial Public offering) / FPO (follow-on public offer / Further public offering).
IPO (Initial Public offering): A public company raises capital by selling its shares to the public when it needs capital. Thus, the shares issued by the company for the first time are called IPO. The face value is usually set at Rs. 100 when issuing an IPO.
FPO (Further public offering): If a public company wants to recapitalize once issued, the shares issued by adding a premium to the face value are called FPO.
How to invest:
The Securities and Exchange Board of Nepal (SEB), the regulatory body of the securities market, has made demat account mandatory for applying for shares in the primary market. After opening the account, the DP issues a Delivery Instruction Slip (DIS) to the customer which is used to sell the shares. Applications for filling up securities can be submitted by all ASWA member banks and financial institutions approved by the Nepal Securities Board and its three branch offices.
ASBA System: Application Supported by Blocked Amount (ASBA): The ASWA system is an arrangement whereby the money of the applicant applying for public issue of securities shares is blocked in the bank account of the applicant till the distribution of securities. Investors are required to apply for public issue of securities only to the bank or financial institution which is permitted to collect applications from the Securities and Exchange Board and has its own account. Banks or financial institutions and related branch offices licensed for the application of securities will prepare the application form in the format prescribed by the Securities and Exchange Board and make it available to the investors. In this way, the share application can be made through the ASWA system and the amount of the applicant who has not received the share within three days after the notification of share distribution is automatically paid.
C-ASBA system: C-ASBA is a system in which the application form is shared online from home by applying for shares from your mobile and laptop. In order to run this system, you have to go to the bank with your ASWA service and apply. Can be done
Now after opening a Demat account and availing of the C-ASBA service from the concerned bank, you can avail the “Mero Share” service from the DP or the DEMAT organization. From the list of FPOs, you can fill up the share application from the company of your choice at home. This is the process of applying for securities in the primary market.
Now, when buying securities like this, let’s pay attention to the suggestions given by the Nepal Securities Board.
What to do when buying securities in case of public issue?
- Make investment decisions only after studying the company’s statement of disposal and analyzing the company’s performance status, financial position, net worth, profit-loss position, etc., management side, risk side.
- Contact the issuing company, the issuing and sales manager, and the designated application collection centers for other updated details related to the issuing company, including the statement.
- After applying for the purchase of securities, be aware of the distribution of securities, repayment, receipt of certificates and listing.
- Be aware of the risk of change in the market price of the securities as the issue price of the securities does not reflect the price to be maintained in the stock exchange market after listing.
When buying and selling securities listed in the stock exchange market:
- Buy and sell securities only through securities brokers who have obtained certificates from the Securities and Exchange Board and are members of the securities exchange market.
- Study the company’s periodic and annual reports and make investment decisions based on important factors such as the company’s performance status, financial status, management and the returns provided to investors.
- Keep information about the daily market price and trading of securities circulated through newspapers and other media.
- Sensitive information that may affect the price of securities related to the company is immediately placed on the information board of the securities exchange market, so for such information, also contact the licensed securities broker.
- To provide necessary details to the broker to keep customer account before buying and selling securities, to get proof of purchase and sale order given by him and to clear the transaction within 3 working days after the day of trading and in case of bond or debenture. Be careful.
- Purchased securities are registered in the Securities Exchange Market and placed in blank transfer for immediate sale without transferring the name in your name. Do not miss the opportunity to receive dividends
Other things to consider:
- Because you have to bear the risk of investing in securities, make decisions about investing at your own discretion, not just motivated by rumors, unnecessary publicity or deception.
- Do not forget to keep abreast of the activities of the company where you bought the shares and to attend the general meeting of the company.
- When investing in securities, be careful to avoid future identity disputes by presenting your citizenship certificate or official identity issued by the Government of Nepal
- If you have any queries, doubts or complaints regarding investing in securities, contact the Securities Dealer, Securities Exchange Market and Securities Board.
In this way, a reasonable return can be achieved by investing in the primary market with less risk and in less time.