The calculation of the NEPSE index is based on the concept of the market capitalization (sum of the market capitalization of all the company listed in the Nepal Stock Exchange). If the ratio of current period market capitalization to the base period market capitalization is multiplied by the multiplier 100, we get the NEPSE index. This method of index calculation is called the value-weighted method. This concept can be illustrated with a hypothetical example, considering ‘0’ as the base period and ‘1’ as the current period as follows:

M.C. = Market Capitalization.
O. S. = Outstanding Shares

NEPSE Index = (Total Market Capitalization of all the Companies Listed/Total Base Year’s Market Capitalization) *100
NEPSE Index = (187500/157000)* 100
NEPSE Index for the time period ‘1’ is 119.43 with reference to the base period ‘0’.