In mid-September, Finance Minister Dr. Swarnim Wagle unveiled a 21-point action plan to revive Nepal's capital market. The next trading day, the NEPSE index jumped 48.57 points and turnover hit Rs 8.29 billion, the busiest session in roughly two months. The day after, the market gave back 21.19 points. The applause arrived before a single rule had been written, which is worth keeping in mind while reading what follows.
One line in the plan deserves more attention than the rally got. The existing NEPSE index will continue as an all-equity index, while a new benchmark index is expected to be introduced, with testing to begin by mid-December 2026. Unlike a simple market-capitalisation measure, the proposed benchmark is expected to consider tradable shares, market capitalisation, company financial health, trading liquidity, corporate governance and the quality of information disclosure. That list of criteria is the whole story. The current index counts everything. The new one would judge.
Here is why the distinction matters. On a recent trading session, NEPSE reported total market capitalisation of Rs 46.13 kharba against a float capitalisation of Rs 15.60 kharba, according to session data compiled by ShareSansar. Other sessions show the same shape: Rs 43.34 kharba total against Rs 14.44 kharba float, Rs 43.62 kharba against Rs 14.52 kharba. Roughly two-thirds of the market's listed value sits in promoter holdings, state blocks and other shares that are not available to trade. The headline index is a market-cap-weighted measure of all listed ordinary shares, so the biggest weights go to the biggest companies whether or not their shares actually change hands. The index moves on paper value, not on the value investors can buy.
The mechanics are simple. In a market-cap-weighted index, a company's weight is its share price multiplied by all its listed shares. Promoter shares locked away for years count the same as the shares trading on screen today. A free-float approach counts only the shares available to the public, so the index tracks the part of the market investors can actually reach. That is the difference between measuring the size of the listed universe and measuring the market that trades.
NEPSE already publishes a Float Index, and it answers only part of the question. It strips out the locked shares but still includes every tradeable company on the same terms, whatever its accounts look like. The proposed benchmark adds the missing screens: financial health, governance, disclosure. An index that gives weight to disclosure quality creates a new incentive. Companies that report cleanly and govern well would carry more weight in the number the country watches, and the ones that do not would carry less. An index cannot audit a company, but it can decide whose numbers define the market's story.
For most Nepali investors the index is a mood number: up means a good day, down means a bad one. But indices do quieter work too. Fund managers are judged against them, index-linked products can only be built on rules-based benchmarks, and outside investors read them as a summary of the market. A benchmark screened for governance and disclosure gives each of those users a cleaner instrument than an all-equity average.
The exchange itself is part of the story. NEPSE is 89.39% owned by the state and its institutions: the Government of Nepal holds 58.66%, Rastriya Banijya Bank 11.23%, the Employees Provident Fund 10%, and Nepal Rastra Bank 9.51%. The plan proposes restructuring the exchange based on a taskforce report submitted on Poush 25, 2082. A restructuring proposal sat with the Finance Ministry for nearly two years before this plan; the direction is now set again, but the history is a reminder that announcements are the easy part.
The index sits inside a wider package: margin lending through licensed brokers targeted by mid-January 2027, legal frameworks for intraday trading, securities lending and borrowing, and short selling; sector-specific IPO pricing rules by Poush-end 2083; bond-market development; secondary-market access for non-resident Nepalese; and a push to move institutional money out of bank deposits. The Securities Board of Nepal's September 24 concept paper on intraday trading, proposing a buy-first-sell-later pilot on liquid names, is the first concrete step taken under this plan.
The honest caveats come in two layers. First, deadlines in this market slip, and the two-year wait on restructuring is the precedent. Second, a benchmark cannot fix what it measures. Liquidity is thin: Nepalytix reported that on September 7, only nineteen of 236 traded securities changed hands more than 400 times. An index of liquid, well-governed companies is only as good as the pool it selects from. If the underlying liquidity does not improve, the new benchmark becomes a portrait of a small club rather than a measure of the market.
That is the tension the new index carries into its December testing. If disclosure and governance start to carry weight in the number investors watch, companies gain a reason to improve them, and the ruler reshapes what it measures. If the deadline slips, it joins the list of announcements the market applauded for a day. The rally came first. The work comes next. What the index ends up measuring will depend on which of those the system delivers.
This article is published for research and education purposes only. It is not investment advice, and nothing here should be read as a recommendation to buy, sell, or hold any security. Figures cited reflect publicly reported information at the time of writing and may be revised.