NEPSE in Risk, Market Downturn Amid Regulatory Pressure and Technical Breakdown

The stock market fell again on Sunday, the first trading day of the week, extending its losing streak for the third consecutive session. Analysts attribute the decline to the recent government decision mandating National Identity Cards for stock market transactions, which has created fear of asset scrutiny and money laundering exposure. Many investors are believed to have sold their holdings due to this regulatory pressure.

Non-Resident Nepalis (NRNs), who were active participants in Nepal’s secondary market, are also reportedly exiting due to difficulties in updating their identity documents. As a result, investor confidence has weakened further.

On Sunday, the NEPSE index dropped by 18.02 points, closing at 2739.95 points. Despite the decline in the index, trading volume surged. Compared to Thursday’s turnover of NPR 5.02 billion, Sunday recorded transactions worth over NPR 6.54 billion involving 140 million shares of 323 companies traded 58,105 times.

Key Movers

• Vikas Hydropower hit the positive circuit, rising NPR 35.30 to close at NPR 388.70.

• CYC Nepal Microfinance gained more than 4%.

• Narayani Development Bank slumped by 7.29%, the biggest loser of the day.

By turnover, Himalayan Distillery led with NPR 1.75 billion worth of trades, followed by Nepal Reinsurance (NPR 245 million) and Himalayan Reinsurance (NPR 230 million).

Among the 13 sub-indices, only one closed in green, while 12 declined. The Manufacturing and Processing sub-index edged up by 0.15%, while the Development Bank sub-index plunged by 1.69%, making it the weakest performer. The Hydropower sub-index also fell by more than 1%.

Analysts emphasize that the market now requires strong policy intervention to restore confidence. Investors have called for easier margin trading and for banks to be allowed to trade freely in the secondary market.

Technical Analysis

According to technical analyst Ajit Khanal, NEPSE is now facing heavy technical pressure. After five consecutive bearish candles, the index broke below the 61% Fibonacci retracement level, which was considered a major support. The sideways channel that the market had been holding also collapsed.

No positive technical indicators are currently visible. Worryingly, turnover increased exactly on the day of the support breakdown, signaling strong selling pressure. The Relative Strength Index (RSI) stands at 37 and is approaching the oversold zone.

The next strongest support lies at the 200-day Moving Average (200MA), around the 2700-point level. RSI is also expected to move closer to 30 at this level, meaning the index could potentially test 200MA in the coming days.

Trading data shows a significant increase in turnover compared to recent sessions, largely driven by block/matching trades in large-cap companies, especially in the Hydropower sector. The Manufacturing & Processing sector alone accounted for more than 30% of total turnover, with Himalayan Distillery (HDL) seeing heavy matching transactions.

Among the top 10 brokers, six executed more sell orders while four were net buyers. On Sunday, Broker No. 34 alone recorded massive trades in HDL — 532,000 shares bought and 888,000 shares sold.