Post-Dashain Market Surge: 'Smart Money' Fuels 51% Volume Jump as NEPSE Turns Bullish

The NEPSE index, which stood at 2634.17 on the last trading day before Dashain, surged by 2.13% (55.98 points) to close at 2690.15 by the end of this post-holiday week. This growth is not merely a numerical increase but the result of a positive shift in market psychology. The increased investor activity, particularly on the eve of the release of first-quarter financial reports and the anticipated post-festive liquidity in the banking system, is viewed as highly significant.

The stock market remained open for all five days this week. Out of the five trading days, the market advanced on a positive trajectory for three days, while experiencing a minor point correction on the other two. Technical analysts interpret this pattern—advancing with intermittent profit booking rather than continuous uncorrected growth—as a sign of a healthy and sustainable market trend. The two days of minor decline prove that there is a balanced presence of both aggressive buyers and profit-booking sellers in the market.

This week, not only did the NEPSE index—considered the mirror of the overall market—rise, but other crucial indicators reflecting the market's inner depth also provided strong support. The Float Index, which shows the status of tradable shares for the general public, increased by 2.03%. Similarly, the Sensitive Index, which measures the performance of large and fundamentally strong 'blue-chip' companies, also climbed by 2.13%. The Sensitive Float Index witnessed an attractive growth of 2.19%. This clearly demonstrates that this week's market growth was not solely driven by manipulation in a few small companies but was made possible by increased investor attraction towards the shares of fundamentally sound and large-cap companies.

More than the index increase, the rise in trading volume is considered a crucial basis for market sustainability. This week, the NEPSE index's growth was magnificently supported by the trading volume. In the last week before Dashain, the market saw a daily average turnover of only around Rs 4.58 billion. However, immediately after the festivals, investors mobilized substantial capital in the market. This week, the daily average trading volume reached Rs 6.94 billion.

Compared to the previous week, this week's daily average trading volume witnessed a massive 51.39% surge. A more than 51% jump in trading volume alongside a 2% index growth clearly indicates the entry of 'smart money' (large investors' funds) and shows that investors are very eager to buy shares. Likewise, another basis for measuring market depth—the daily average number of shares traded and the number of transactions—also saw significant growth. This week, the daily average number of shares traded increased by 40.43%, and the daily average number of transactions rose by 39.96%. This shows a very dense participation not only of institutional investors but also of small and retail investors in the market.

An upward stock market directly impacts investors' wealth (market capitalization). This week, NEPSE's total market capitalization also expanded by more than 2%. On the last trading day before Dashain, the overall market size (total market capitalization) was Rs 4.534 trillion. However, after a week of enthusiastic trading, the market capitalization increased by Rs 96 billion to reach Rs 4.630 trillion. This means investors' wealth in the stock market increased by Rs 96 billion in just one week. While discussions continue about a sluggish overall economy, this proves that the stock market is playing a vital role in capital formation.

Another interesting and positive aspect of the market this week is that the indices of all 13 listed sub-groups (sectors) in NEPSE closed higher. The growth of the entire market, rather than just one or two sectors, suggests that investors have paid attention to portfolio diversification.

The hydropower sub-group remained the top choice for investors again this week. The hydropower sub-group index surged the highest by 3.78%. Closing at 3561.87 in the previous week, the hydropower index leaped by 134.81 points to reach a height of 3696.68 this week. Recently, news about hydropower companies issuing right shares, expanding capacity, and generating good electricity during the favorable season has increased the attraction of both speculative and long-term investors in this sector. Similarly, the index of the 'Others' sub-group also increased by more than 3% this week.

Although hydropower led in terms of percentage growth, looking at the index points, another large sub-group (whose index went from 6913 to 7062) achieved the widest growth of 148.71 points. Analysts state that such growth in sub-groups with large volumes and capital acted as the main engine to lift NEPSE higher.

Amidst the positive rhythm of the overall market and sub-groups, the performance of some individual companies (stocks) remained highly aggressive this week. The surge in the share price of Beni Hydropower Project became the most talked-about topic. The company's share price increased by a maximum of 101.05% in a single week. The shares of this company, which had a final trading price of only Rs 353 in the week before Dashain, reached a high of Rs 709.70 this week, hitting continuous positive circuits. Providing more than a 100% return in such a short time has led some experts to point out the possibility of cornering by large investors or purchases based on special information (suspicion of insider trading). However, this growth, occurring within the market's rules, has enriched many investors.

Similarly, the share price of Upper Mailung Khola Hydropower also increased by 14.5%, and the share price of Lumbini Bikas Bank saw a jump of nearly 13.5%. The expectation of good first-quarter reports from development banks can also be assumed as the reason for the increased buying pressure on stocks like Lumbini.

On the other hand, even in a rising market, investors in some companies had to bear heavy losses. The share price of Chirkhwa Hydropower, which was traded, dropped the most by 15.15% this week. Facing continuous selling pressure, Chirkhwa's shares, which had a final trading price of Rs 581 in the previous week, dropped to Rs 493 for the final trade this week. This once again reminds us of the traditional principle that there is no guarantee all companies will rise just because the market is rising, and investing without looking at a company's fundamentals or technical status carries high risk.

Analyzing the detailed trading data (floorsheet) of this week, the strategy of large and institutional investors appears very interesting. Securities like 7% Laxmi Sunrise Debenture 2092, Ru Ru Jalbidhyut Pariyojana, and 6.25% Prime Bank Debenture 2093 topped the list of 'Most Popular Buy Stocks' (most purchased stocks).

This high buying pressure seen in debentures indicates that mutual funds or institutional investors are pouring investments into safe instruments that yield fixed returns to minimize their risk. In the current situation of declining interest rates, those seeking safe future returns (fixed income) are picking up debentures.

Conversely, companies like Mid Solu Hydropower, Kalinchowk Darshan, and Shwet Ganga Hydropower & Construction are at the forefront of the 'Most Popular Sell Stocks' (most sold stocks) list. The floorsheet shows that investors aggressively sold shares to secure profit (profit booking) from these companies, whose prices had recently increased. It is clear that investors are trying to exit by cashing in on the attraction seen a while ago, especially in these companies from the hydropower and tourism sectors.

Overall, this post-Dashain week has infused new enthusiasm into the Nepali stock market. Adequate liquidity in banks and financial institutions, gradually decreasing loan interest rates, and regulatory bodies becoming somewhat flexible towards the stock market have fundamentally strengthened the market.

Investors' attention will now be focused on the first-quarter (Shrawan, Bhadra, and Ashwin) financial reports of the current fiscal year published by listed companies. Indicators such as companies' profits, distributable profits, and earnings per share will determine the actual direction of the post-Tihar market. However, the trading volume that increased by 51% and the capitalization of Rs 96 billion added to the market confirm that a 'bullish' (positive) sentiment currently dominates NEPSE. Rather than being overly excited by the market's momentum, it seems advisable for investors to make sensible decisions based on the companies' financial condition and their own risk-bearing capacity.

Technical Analysis

A detailed study of the daily chart (daily timeframe) reveals that NEPSE has broken out (broken upwards) of the downward sequence of 'lower-highs' and 'lower-lows' it had been forming for some time. The index found strong support around the 2600 to 2625 point mark and initiated an upward journey by forming a 'higher-low' from there. This technically confirms that the market's continuous downward trend has stopped and a journey towards new heights has begun. Currently, the market's first and crucial support (S1) is at 2602.39 points, while the 2754.08 point level is expected to act as the first resistance (R1) in its upward journey.

Technical tools measuring market momentum and strength have also shown high buyer morale on the daily chart. The Relative Strength Index (RSI) has currently reached 69.67. This is very close to the 70 'overbought' zone. While this shows strong 'bullish momentum' in the market, it also signals that the market could enter a consolidation phase for some time in the near future as investors seek to book profits.

On the other hand, the MACD has given a clear positive crossover. The MACD line (18.61) has climbed above its signal line (10.79), and the green histogram is increasing, providing further strength to the market's positive momentum. Analyzing the Ichimoku Cloud, the index has already entered the 'Kumo Cloud' and is trading above the baseline (Kijun-Sen) and conversion line (Tenkan-Sen).

The picture on the long-term or weekly chart (weekly timeframe) is even more encouraging. After a few weeks of decline, a strong signal of a 'Change of Character' (CHoCH) is visible on the weekly chart. This means the market's downtrend can now be considered over, and an uptrend has begun. Just last week, a strong bullish candle of 55.98 points (2.13%) formed on NEPSE. On a weekly basis too, the market's support and resistance stand at 2602.39 and 2754.08 points, respectively.

On the weekly chart, the RSI is at a neutral level of 53.49. Although the daily RSI is near the overbought zone, the weekly RSI shows that the market still has plenty of room to go up and there is no need to panic. Similarly, although the weekly MACD line (-22.07) is still below the signal line (5.36), the decreasing red histograms clearly show that the long-term selling pressure is weakening. According to the Ichimoku system, NEPSE remaining above the weekly cloud (Kumo) is a very strong aspect, where the blue Kijun-Sen line (2607.24) is acting as a strong pillar (support) to prevent the market from falling.

Overall, the technical structure of NEPSE has moved in a completely positive direction. The breakout of the downtrend line and the support from momentum indicators like MACD suggest that the market's foundation is getting stronger. However, since the daily RSI is near the 70 mark, small and short-term investors need to exercise some caution as NEPSE approaches the 2754 resistance level, because selling pressure from profit-bookers may occur at that point. Technical analysis concludes that even if there is a minor correction in the market, the positive rhythm will continue as long as the index maintains the 2602 support level (S1). Therefore, instead of panicking immediately or investing out of excitement at higher levels, it would be wise for investors to formulate a strategy considering the companies' financial status and these important technical points.