NEPSE Gains 2 Percent After Sharp Correction, Hints at Recovery but Volatility Persists

The Nepal Stock Exchange (NEPSE) index recorded a modest recovery in the past week, rising by 2 percent after a significant decline in the previous session. The benchmark index, which opened the week at 2,782.16 points, gained 55.60 points to close at 2,837.78. This rebound comes on the heels of a 5.69 percent drop in the prior week, leading analysts to interpret the recent movement as a relief rally rather than a confirmed trend reversal. While the upward movement has restored some confidence among investors, the sustainability of this momentum remains under close watch.

During the week, the market witnessed notable fluctuations, reaching a high of 2,866.63 and a low of 2,669.70. The nearly 196-point range reflects that volatility is still present, although slightly lower than the previous week’s turbulence. A strong surge of 83.34 points on Monday set a positive tone at the beginning of the week, indicating the presence of strong buying pressure. However, such sharp early gains often raise questions about whether the momentum is driven by sustainable investment or short-term trading activity.

Market participation remained strong, with total turnover exceeding NPR 57.27 billion over the week. More than 141.6 million shares were traded through over 651,000 transactions, highlighting increased engagement from investors. The overall market capitalization crossing NPR 4.8 trillion suggests that long-term confidence has not weakened significantly despite recent corrections. This level of activity indicates that both retail and institutional investors continue to actively participate in the market.

Technical indicators suggest that the market is in a moderately bullish phase. The daily Relative Strength Index (RSI) stood at 53.83, while the weekly RSI reached 58.28, indicating that the market is neither overbought nor oversold. This neutral positioning provides room for further upward movement if supported by volume. The Moving Average Convergence Divergence (MACD) remaining above the zero line, along with a positive signal line, reinforces the view that the broader trend is still leaning bullish. Additionally, the index trading above its 5-day and 20-day exponential moving averages reflects a positive short-term trend.

Sector-wise performance also supports the recovery outlook. Most sub-indices closed in positive territory, with only a few sectors registering declines. This broad-based participation suggests that buying interest is not confined to a limited number of stocks. In particular, the banking, hydropower, and investment sectors played a significant role in driving the index higher, indicating sectoral rotation and renewed investor interest in key segments of the market.

At the company level, Hotel Forest Inn (HFIN) emerged as the top gainer, surging by more than 77 percent during the week. Such a sharp rise is often associated with low-float stocks, where speculative trading can lead to rapid price increases. This also highlights the presence of high-risk trading behavior in certain segments of the market. On the downside, the 8% Nabil Debenture 2085 (NBLD85) declined by around 11 percent, suggesting that investor interest may be shifting away from fixed-income instruments toward equities in search of higher returns.

Reliance Spinning Mills (RSML) dominated trading activity, recording transactions worth over NPR 2.58 billion during the week. Broker data shows that Naasa Securities (Broker No. 58) was both the top buyer and seller. This pattern typically indicates active intra-day trading or position adjustments by large investors or institutions. Such activity can increase short-term volatility, as large trades influence price movements more significantly.

Looking ahead, the direction of the market in the coming week remains uncertain but critical. Technically, a strong support level is seen around 2,650, while a major resistance zone lies near 2,960. If the index manages to break above the 2,860–2,900 range with strong volume in the early part of the week, it may attempt to test the 2,960 level. However, if trading volume declines and the index falls below 2,800, there is a risk of a corrective move toward the 2,750–2,700 range.

Overall, the recent rebound offers a sign of recovery but does not yet confirm a full trend reversal. The market appears to be attempting to regain strength, but confirmation will depend on sustained volume, sectoral momentum, and the behavior of large investors. The coming week is likely to be decisive—either reinforcing bullish momentum or pushing the market back into a consolidation phase. Investors are therefore advised to closely monitor volume trends, sector rotation, and broker activity before making strategic decisions.