Stock Investment in the Primary Market: Why and How?

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 basics 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 profits at the right time. As a result, they lose themselves and have a far-reaching effect on the overall market.

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 the investment for which they issue different types of securities. The market for buying and selling such securities is the financial market. Yes, Securities here include shares, debentures, pre-emptive shares, dredging wills, etc., also known as financial assets. Based on the nature of the transaction, 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 a 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): When a public company needs capital, it raises capital by selling its shares to the public. Thus, the first issue of shares by a company is called IPO. The face value is usually set at Rs. 100 when an IPO is issued.

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. Financial institutions, merchant banks with permission from the Nepal Securities Board can open Demat accounts called DPs such as 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 and three branch offices approved by the Nepal Securities Board.

ASBA System Application Supported by Blocked Amount (ASBA): 

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 until 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 Board and has its own account. Banks or financial institutions licensed for the application of securities and the concerned branch offices 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, share application can be made through the ASWA system and the amount of the applicant who has not received the share is automatically paid within three days after the share is informed.

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 invested in.

Now after opening a Demat account and availing the C-ASWA 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 at home in the company of your choice. 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 a public issue?

Make investment decisions only by studying the company's statement of disposal and analyzing important factors such as the company's performance status, financial position, net worth, profit and loss position, etc., management side, risk side.
Contact the issuing company, the issuing and sales manager, and the designated application collection centres 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 indicate the value 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 stockbrokers who have obtained certificates from the Securities and Exchange Board and are members of the stock 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 returns to investors.
• Also, keep abreast of the daily market value and turnover 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 notice board of the securities exchange market, so contact the licensed securities broker for information related to such information.
• Before buying and selling securities, you need to provide the required details to the broker to keep the customer account, get the proof of the purchase and sale order given by you and clear the transaction within 3 working days after the transaction and in the case of bonds or debentures. Stay tuned.
• The securities purchased have been recorded in the Securities Exchange Market and placed in blank transfer for immediate sale without transferring the name to the company. Do not miss the opportunity to receive dividends

Other things to consider:

• As you have to bear the risk of investing in securities, make decisions about investing at your own discretion, not just by rumours, unnecessary publicity or deception.
• Don't forget to keep abreast of the activities of the company you bought the shares from and to attend the company's general meetings.
• When investing in securities, be careful to avoid future identity disputes by presenting your citizenship certificate or official identity card issued by the Government of Nepal.
• If you have any queries, doubts or complaints regarding investment in securities, please contact the Securities Dealer, Securities Exchange Market and Securities Board.
• In this way, reasonable returns can be achieved by investing in the primary market with less risk and in less time.