News & Events

Event Date:
Event Type: News & Events
Event Location: Naxal, Kathmandu

Visit to Sun Securities Pvt. Ltd.

Stock Trading Floor Visit Report

On the 2nd of July, the team of IIDS interns accompanied by the staff at IIDS visited Sun Securities Pvt. Ltd. (Broker No. 64), a prominent stockbroker licensed by the Securities Board of Nepal (SEBON). SEBON is the apex regulator of the stock market in Nepal and has licensed a total of 99 brokerage companies to facilitate the trading of stocks of the companies listed in Nepal Stock Exchange (NEPSE). NEPSE has a total market capitalization of around 330,066 Cr. (almost $25 billion) with 248 companies listed form different sectors including Banks and Financial Organization (BFIs), Hydropower, Tourism, Investment, Manufacturing and so on.

The interns had an opportunity to interact with the employees and the director of the organization followed by a thorough session on the basics of stock market in the context of Nepal. Mr. Krishna Giri, Executive Chairman at Sun Securities welcomed us by giving a brief session on personal financing, financial management and the importance of proper investment from the perspective of students. He then went on to explain about the different financial instruments traded around the world including various forms of derivatives like futures, forwards, swaps and highlighted that such advanced financial instruments are still to be introduced in the Nepali Financial Market. Likewise, he touched upon Fundamental Analysis and Technical Analysis and how investors and traders leverage these statistical tools to choose the stocks and forecast their market trends.

Following up, Mr. Rabi Budhathoki re-emphasized the structure of the financial market of Nepal and the functions of different governmental entities like SEBON in regulating and supervising the NEPSE. SEBON has divided the broker types into 3 different categories: Stock Dealer, Full Operating Securities and Limited Brokerage Services based upon the paid-up capital requirement of Nrs.150 Crores, 60 Crores and 20 Crores respectively. Sun Securities Pvt. Ltd. is listed under Limited Brokerage Services mainly dealing with the intermediary roles of settlement of the traded shares between buyers and sellers and generates revenue through a commission ranging from 0.27% - 0.37% of the transaction, depending on the transaction amount. It was insightful to understand the other functions, particularly the idea of marginal lending which is a process of getting a loan for further investment by pledging the existing shares as collateral, facilitated by the brokerage companies. Most importantly, he outlined the overall process on how an individual could enter the Stock Market from opening the Dematerialized (DEMAT) account to Trade Management System (TMS) account and benefit financially. The basic idea of financial benefit through Bonus Dividend, Cash Dividend and Capital Gain was introduced to underscore the importance of entering the stock market. Similarly, Mr. Ashok Sitaula, who has been in the stock market for over two decades, demonstrated the power of compounding, giving an example of doubling a grain of rice on a checkerboard till the 64th square to prove his point. The actual number of rice grains on the 64th square was way beyond our initial guesses showing the surprising rate of compounded growth.

The most interesting part of the day was the opening of the trading floor at 11:00 AM. Luckily, we were there on one of the rarest days in the history of the NEPSE. The trading floor halted when the NEPSE increased by 4% (almost 80 points) in the very first second of the market opening. The market underwent a cooling period of 20 minutes to begin at 11:20 AM. Right when the trading floor opened, the market was again halted for a longer cooling period of 40 minutes when the NEPSE index rose to 5% (almost 100 points) in the next 20 seconds. The trading would have halted for a whole day if the NEPSE index had increased to 6% at any point of the day, however, the index crashed heavily after the second phase of trading started around 12:00 PM. The sudden positive change in the market sentiment is believed to be backed up by the possible political changes in the federal government when CPN-UML and Nepali Congress decided to form a coalition government. However, the positive market sentiment couldn’t last longer as different news floated around mentioning the current prime minister Rt. Hon. Pushpa Kamal Dahal decided not to resign but rather call for the vote of confidence in the parliament. It was an interesting experience for us to capture such invaluable insights and in-depth analysis upfront understanding how different national political and economic factors affect market sentiment. 

Our team ended the visit with a short tour of the office and experienced the working environment of a dynamic broker company. We really appreciate the top-class professional working environment, the highly experienced team and their effort at Sun Securities to provide a differentiated brokerage service in the context of Nepal.

Prepared by: Prasiddha Sapkota, Summer Intern, IIDS