NEPSE Tests Crucial Technical Support as Turnover and Investor Confidence Weaken

Kathmandu — Nepal’s stock market extended its losing streak on Wednesday as the benchmark NEPSE index declined for the third consecutive trading session. The index fell by 7.79 points to close at 2,688.88, reflecting continued selling pressure and growing caution among investors.

The market had opened slightly higher than the previous day’s closing level, creating a small gap-up at the beginning of the session. However, the initial optimism faded almost immediately, with the index filling the opening gap within the first minute of trading. The failure to sustain the early gain indicated that sellers remained active and that buyers were not yet confident enough to push the market decisively higher.

Trading activity also weakened alongside the index. The total turnover declined to NPR 4.02 billion from NPR 4.42 billion recorded in the previous session. During Wednesday’s trading, more than 9.77 million shares of 343 listed companies and securities changed hands through over 48,000 transactions.

The decline in both the benchmark index and turnover suggests that investors are becoming increasingly cautious. A fall in the index accompanied by lower turnover generally indicates reduced buying interest rather than aggressive panic selling. Many investors appear to be waiting for a clearer market direction before committing additional funds.

Although the market has declined for three consecutive sessions, the turnover remaining above NPR 4 billion shows that investor participation has not disappeared entirely. The market is still receiving a reasonable level of liquidity, but that liquidity is being distributed selectively rather than supporting a broad-based rise.

The decline was also visible in other major market indicators. The Sensitive Index, which represents the performance of selected large and fundamentally significant companies, decreased by 0.78 points. The Float Index fell by 0.65 points, while the Sensitive Float Index declined by 0.42 points.

The weakness in these indicators suggests that the selling pressure was not limited to small or speculative stocks. Large-cap companies and shares with relatively high public holdings also experienced pressure. However, the limited decline in the sensitive indicators shows that the selling was moderate rather than disorderly.

Sector-wise performance reflected widespread weakness. Out of the 13 sub-indices listed on NEPSE, 11 ended the session in negative territory. Only the Mutual Fund and Others sub-indices managed to register marginal gains.

The decline across most sectors shows that the market’s weakness was broad rather than concentrated in a single industry. When the majority of sectoral indices fall together, it generally indicates that investors are reducing exposure across different areas of the market instead of reacting to company-specific developments.

Despite the overall decline, some individual companies continued to attract strong investor interest. Everest Colour’s share price reached the positive circuit level for the eighth consecutive trading session. Its price increased by NPR 129.10 to close at NPR 990.10 per share.

The continuous rise in Everest Colour indicates strong demand for the company’s limited available shares. However, repeated circuit-level gains can also increase the risk of sharp price volatility once supply begins to enter the market. Investors may therefore need to distinguish between price momentum and the company’s underlying financial position.

Kalinchowk Hydropower also recorded a significant increase, with its share price rising by approximately 12.5 per cent. The sharp movement suggests company-specific buying interest even as the broader market remained under pressure.

In terms of transaction value, Himalayan Power Partner recorded the highest turnover of the session. Shares worth NPR 224.8 million were traded in the company. Khani Khola Hydropower and Reliance Spinning Mills were also among the most actively traded companies.

The concentration of turnover in a limited number of stocks suggests that investors are currently adopting a selective strategy. Instead of purchasing shares across the market, they appear to be focusing on stocks showing strong momentum, higher liquidity or expectations of company-specific developments.

The recent decline can be interpreted as a short-term market correction following the earlier upward movement. When the market rises continuously for a certain period, investors often begin to secure profits. Such profit-booking can place temporary pressure on the index even when the broader market outlook has not changed significantly.

At the same time, the reduction in turnover indicates that many investors are unwilling to enter the market aggressively at the current level. Buyers may be waiting for the index to confirm support, while sellers may be attempting to protect previously earned gains.

The market’s next direction is also likely to depend on factors beyond daily technical movements. The financial performance of listed companies, the implementation of monetary policy, movements in bank interest rates and the availability of investable liquidity will remain important.

Lower interest rates generally support the share market by reducing the attractiveness of fixed-income deposits and lowering borrowing costs. However, investors also examine whether cheaper credit is being translated into stronger business performance, higher corporate earnings and increased economic activity.

From a technical perspective, Wednesday’s session was particularly important because the NEPSE index again tested its 200-day moving average. The 200-day moving average, commonly referred to as the 200 MA, is widely used to identify the market’s longer-term trend and a major support or resistance area.

For the third consecutive session, the market approached the 200 MA and managed to close above the support zone. The formation of three consecutive candles near this level shows that buyers have so far responded whenever the index has moved closer to the long-term average.

The repeated defence of the 200 MA indicates that the technical level remains important for both buyers and sellers. Investors who consider the moving average a long-term support may be purchasing near the level, while short-term traders may be using it to manage risk.

However, merely touching the support and closing slightly above it does not guarantee an immediate recovery. For a stronger positive signal, the market would need to remain above the 200 MA and begin forming higher highs and higher lows with improved turnover.

Wednesday’s intraday structure remained weak despite the index holding above the support. The market reached its highest point of the day at around 12:42 pm. After reaching the intraday high, the index moved through a series of lower highs and lower lows.

A lower-high and lower-low formation indicates that sellers gradually gained control after the market failed to extend its rise. Each recovery attempt remained below the previous peak, while subsequent declines pushed the index towards lower levels.

This pattern suggests that the intraday buying strength was not sufficient to reverse the prevailing pressure. The market’s close above the 200 MA therefore represents a defence of support rather than a confirmed bullish reversal.

The activities of major brokers also showed a balanced market. Among the 10 largest brokers by transaction value, five recorded stronger buying activity while the remaining five were more active on the selling side.

The equal distribution between major buyers and sellers indicates that no clear one-sided institutional or large-scale trading pressure was visible. The market appears divided between participants expecting a rebound from the 200 MA and those anticipating further weakness.

Such a balanced broker position often precedes a decisive market move. A clear direction may emerge once either buyers begin accumulating shares with stronger turnover or sellers push the index below the major support level.

The 200-day moving average has therefore become the most important reference point for the market in the immediate term. If the index continues to remain above the level and attracts stronger buying participation, the current decline may remain limited to a normal short-term correction.

A sustained recovery above the support could improve investor confidence and encourage previously cautious buyers to return. In that situation, the market may attempt to regain recently lost levels and move towards its immediate resistance zones.

On the other hand, a decisive breakdown below the 200 MA, particularly with higher turnover, would carry a more negative technical implication. Such a move could trigger additional selling from traders who use the long-term average as a stop-loss or trend-identification level.

The market is consequently positioned at a critical stage. The index has not yet confirmed a major downward trend because the 200 MA support remains intact. At the same time, it has not produced sufficient evidence of a sustainable recovery because the intraday structure, sectoral performance and turnover remain weak.

Investors are therefore likely to remain cautious in the next few sessions. The behaviour of the index around the 200 MA, the strength of turnover and the formation of the next candlesticks will provide clearer indications about whether the market is preparing for a rebound or entering a deeper correction.

For now, the market can be described as technically supported but psychologically fragile. The 200 MA has prevented a sharper decline, but buyers will need to demonstrate stronger participation before the market can establish a convincing positive direction.