NEPSE Index: Exact Numbers and Historical Context
The NEPSE Overall Index has shown a steady recovery trajectory over the past three years. Here are the actual closing values from NRB's official stock market indicators (Table 58):
| Indicator | Mid-Jan 2024 | Mid-Jan 2025 | Mid-Jan 2026 | YoY Change |
|---|---|---|---|---|
| NEPSE Index (Closing) | 2,120.62 | 2,594.13 | 2,641.44 | +1.82% |
| NEPSE Sensitive Index | 388.17 | 441.42 | 454.74 | +3.02% |
| NEPSE Float Index | 145.65 | 176.15 | 181.24 | +2.89% |
| Market Capitalization (Rs. Mn) | 3,330,750 | 4,302,884 | 4,435,032 | +3.07% |
| Listed Companies | 271 | 267 | 284 | +17 new |
| Listed Shares (Million) | 8,170.31 | 8,637.64 | 9,224.46 | +6.79% |
| Market Cap to GDP Ratio | 62.06% | 75.37% | 72.62% | -2.75pp |
Key observations from this data:
- The NEPSE index grew 22.3% from 2024 to 2025, but moderated to just 1.82% from 2025 to 2026, indicating the market is consolidating after a strong rally
- Market capitalization crossed NPR 4.4 trillion, adding NPR 132 billion in one year
- 17 new companies listed in 2025/26, bringing the total to 284
- The 12-month rolling standard deviation dropped from 347.99 to 90.80, meaning volatility has significantly decreased — characteristic of a maturing bull market
- Market Cap to GDP ratio at 72.62% is healthy but below the 2025 peak of 75.37%
Sector Sub-Index Performance: Real Data Breakdown
NEPSE tracks 13 sector sub-indices. Here is the actual performance data from the Share Price Index report (mid-July to mid-January 2025/26):
| Sector | Closing Index | 52-Week High | 52-Week Low | YoY Change |
|---|---|---|---|---|
| Commercial Banks | 1,369.44 | 1,375.98 | 1,341.47 | +0.12% |
| Development Banks | 5,577.85 | 5,612.37 | 5,308.77 | +3.90% |
| Finance Companies | 2,423.27 | 2,423.27 | 2,260.94 | -16.01% |
| Life Insurance | 12,867.38 | 13,360.21 | 12,813.12 | +1.80% |
| Non-Life Insurance | 10,949.03 | 10,994.86 | 10,701.32 | -12.30% |
| Microfinance | 4,888.18 | 4,955.96 | 4,844.99 | -0.06% |
| Manufacturing | 8,821.31 | 8,895.27 | 8,256.31 | +33.13% |
| Hotels | 7,044.38 | 7,136.34 | 6,768.77 | +7.48% |
| Trading | 3,810.01 | 3,810.96 | 3,747.67 | -11.98% |
| Mutual Fund | 20.72 | 20.72 | 20.21 | +3.03% |
| Investment | 102.09 | 103.15 | 100.51 | +1.85% |
| Hydro Power | 3,382.10 | 3,382.10 | 3,292.91 | -6.15% |
| Others | 2,357.74 | 2,376.15 | 2,293.96 | +24.26% |
Strongest Sectors (Outperformers)
- Manufacturing (+33.13% YoY): The standout performer driven by import substitution policies and growing domestic demand. Companies like UNL, BNT, and HDL have delivered exceptional returns. The sub-index rose from 6,626 to 8,821.
- Others (+24.26% YoY): This category includes diverse companies outside traditional sectors, showing broad market participation beyond financial stocks.
- Hotels (+7.48% YoY): Tourism recovery post-COVID and Visit Nepal initiatives have boosted hotel stocks. Our AI engine detected Hotels as the current top performing sector with the highest momentum score.
- Development Banks (+3.90% YoY): Outperforming commercial banks due to regional presence and relatively better credit growth in semi-urban areas.
Weakest Sectors (Underperformers)
- Finance Companies (-16.01% YoY): The worst performing sector, hit by NRB regulatory tightening, merger uncertainties, and rising NPL ratios.
- Non-Life Insurance (-12.30% YoY): Premium growth slowdown and increased claims impacted profitability and investor sentiment.
- Trading (-11.98% YoY): A small sector with only 4 listed companies, highly volatile and sentiment-driven.
- Hydropower (-6.15% YoY): Despite long-term potential (83,000 MW capacity, only 2,800 MW developed), the sector corrected due to PPA delays and oversupply concerns.
Market Capitalization Breakdown by Sector
Understanding where the money is concentrated helps identify which sectors drive the NEPSE index:
| Sector | Market Cap (Rs. Mn) | Listed Companies | Share of Total |
|---|---|---|---|
| Commercial Banks | 1,056,197 | 19 | 24.55% |
| Hydro Power | 701,003 | 91 | 16.29% |
| Insurance (Life + Non-Life) | 616,964 | 24 | 14.34% |
| Microfinance | 369,965 | 50 | 8.60% |
| Others | 365,290 | 7 | 8.49% |
| Investment | 316,387 | 7 | 7.35% |
| Trading | 242,981 | 4 | 5.65% |
| Manufacturing | 224,803 | 22 | 5.22% |
| Development Banks | 197,474 | 16 | 4.59% |
| Hotels | 118,457 | 7 | 2.75% |
| Finance Companies | 93,363 | 20 | 2.17% |
Commercial Banks alone control 24.55% of the entire market, which is why banking stocks are called NEPSE bellwethers. Combined with Development Banks and Finance Companies, the financial sector holds over 31% of total market capitalization. Hydropower with 91 listed companies and NPR 701 billion market cap is the second largest sector.
Banking and Financial Sector: BFI Key Indicators (Magh 2082)
The Banking and Financial Institution (BFI) data from NRB's monthly report provides critical insights into the health of Nepal's financial system:
| Indicator | Value | Significance |
|---|---|---|
| Total Deposit/GDP | 126.54% | Strong deposit mobilization, exceeding GDP |
| Total Credit/GDP | 94.94% | High credit penetration in the economy |
| Credit-to-Deposit Ratio | 74.32% | Below NRB ceiling of 90%, healthy lending room |
| NPL Ratio (All BFIs) | 5.42% | Above comfort zone of 5%, needs monitoring |
| Capital Adequacy Ratio | 12.61% | Well above NRB minimum of 11% |
| Liquid Assets/Total Deposit | 23.58% | Strong liquidity position |
| Total BFIs | 54 | 20 commercial, 17 dev banks, 17 finance |
Key takeaways for stock investors:
- The CD Ratio at 74.32% means banks still have significant room to lend more (NRB ceiling is 90%), which supports future credit growth and earnings
- NPL ratio at 5.42% is above the 5% comfort threshold — banks with lower NPLs will outperform
- Capital adequacy at 12.61% provides a solid buffer above the 11% regulatory minimum
- Liquid assets at 23.58% of deposits indicate the banking system can handle both withdrawals and new lending
- With 54 BFIs (20 Class A, 17 Class B, 17 Class C), further consolidation through mergers is expected
NRB Monetary Policy: Current Rate Environment
Nepal Rastra Bank's monetary policy rates directly influence stock market performance:
| Policy Rate | Current Level | Impact on Stocks |
|---|---|---|
| Policy Repo Rate | 4.25% | Low rate supports equity valuations |
| Bank Rate | 5.75% | Moderate, allows bank profitability |
| Interbank Rate | 2.75% | Very low, excess liquidity in system |
| Wt. Avg Deposit Rate (Class A) | 3.51% | Low returns push investors to equities |
| Wt. Avg Lending Rate (Class A) | 7.00% | Manageable borrowing costs for companies |
The interest rate spread (lending minus deposit) of approximately 3.49% provides healthy net interest margins for banks. The low deposit rate of 3.51% is a key driver pushing retail investors from fixed deposits to the stock market, as equity returns significantly exceed bank deposit returns in a bull market.
Macroeconomic Context: Nepal Economy in 2026
Stock market performance does not exist in isolation. Here are the key macroeconomic indicators affecting NEPSE:
| Indicator | Value | Impact on NEPSE |
|---|---|---|
| GDP Growth Rate | 3.99% | Moderate growth supports corporate earnings |
| Inflation Rate | 3.25% | Controlled inflation is equity-friendly |
| Remittance Inflow | NPR 1,261 Bn | Drives deposits and market liquidity |
| Trade Balance | -NPR 955 Bn | Deficit, but offset by remittances |
| Balance of Payments | +NPR 573 Bn | Surplus supports currency stability |
| Foreign Exchange Reserves | NPR 3,303 Bn | Strong reserves support confidence |
| Per Capita GDP | NPR 200,237 | Growing purchasing power |
| Population | 30.5 million | Growing investor base |
The combination of controlled inflation (3.25%), positive BOP surplus (NPR 573 billion), strong remittance inflows (NPR 1,261 billion), and accommodative NRB policy creates a supportive environment for equity markets.
Market Volatility and Trading Activity Analysis
Volatility Compression
The 12-month rolling standard deviation of NEPSE dropped dramatically from 347.99 in 2025 to 90.80 in 2026 — a 74% reduction. This indicates:
- The market has transitioned from a high-volatility recovery phase to a low-volatility consolidation phase
- Price swings are smaller and more predictable, favoring swing trading strategies with tighter risk management
- A volatility squeeze often precedes a major directional move — traders should prepare for a breakout
Market Concentration Metrics
- Top 10 companies hold 26.68% of total market capitalization (up from 26.28%)
- Group A stocks (blue chips) represent 45.91% of market cap
- This concentration means a handful of large-cap banking and insurance stocks drive index movements
Trading Activity
Traded quantity ratio dropped from 30.01% (2025) to 17.96% (2026), and turnover-to-market-cap ratio fell from 26.01% to 16.26%. Lower turnover with stable prices is typically a sign of accumulation — smart money buying quietly before the next leg up.
AI-Powered Market Regime Analysis
Our proprietary Top-Down AI Trading Engine analyzes the market in three layers — Index health, Sector strength, and Individual stock technicals. Current readings as of March 25, 2026:
- Market Regime: BULLISH (Index Score: 70/100)
- Top Performing Sector (AI-detected): Hotels (Score: 63)
- Active Buy Signals: 2 stocks meeting all criteria
- Active Tracked Trades: 4 open positions
The AI engine uses EMA crossovers, RSI momentum, MACD trend confirmation, volume analysis, ADX trend strength, and broker accumulation patterns from floor sheet data. Only stocks that pass ALL filters at the index, sector, and individual level receive buy signals — ensuring high-probability setups.
NEPSE Future Prediction for 2026: Data-Driven Scenarios
Bullish Scenario (55% Probability)
Conditions: NRB maintains or cuts policy repo rate below 4.25%, GDP growth exceeds 4.5%, remittance inflows remain strong, and no major global recession.
- Target: 2,850-3,000 (7-13% upside from current 2,641)
- Timeline: By mid-July 2026 (end of fiscal year)
- Key catalyst: Further interest rate cuts making fixed deposits less attractive
- Leading sectors: Manufacturing, Hotels, Development Banks
Neutral/Consolidation Scenario (30% Probability)
Conditions: NRB holds rates steady, GDP growth at 3.5-4%, NPL ratio remains elevated around 5-6%.
- Range: 2,500-2,750
- Strategy: Sector rotation and stock-specific trading
- Best approach: Accumulate quality dividend stocks on dips to lower end of range
Bearish Scenario (15% Probability)
Conditions: NRB tightens policy, NPLs spike above 7%, global recession hits remittances, political instability disrupts markets.
- Downside target: 2,300-2,400
- Strategy: Reduce equity exposure, increase cash and fixed income allocation
- Warning signals: NPL ratio above 7% and CD ratio approaching 90%
Practical Trading Strategies Based on Current Data
For Swing Traders (5-15 Days)
- Focus on Manufacturing sector stocks which lead with +33.13% YoY returns and strong momentum
- Hotels sector showing +7.48% YoY with tourism recovery is an excellent rotation play
- Avoid Finance Companies (-16.01% YoY) and Non-Life Insurance (-12.30% YoY) until trend reversal is confirmed on weekly charts
- Use the low volatility environment (StdDev 90.80) for tighter stop losses — the reduced noise means cleaner signals
- Monitor our AI engine which currently shows 2 active buy signals with BULLISH regime confirmation
For Long-Term Investors (1+ Years)
- Banking stocks remain core holdings due to 24.55% market cap dominance and healthy CD ratio (74.32%) providing earnings growth runway
- Hydropower has 91 listed companies with NPR 701 billion market cap — long-term Nepal has 83,000 MW potential with only 2,800 MW developed
- Target banks with NPL below 3% and capital adequacy above 13% for safer investments
- Consider Development Banks (+3.9% YoY) which are outperforming Commercial Banks (+0.12% YoY)
- Diversify across at least 3-4 sectors to reduce concentration risk
Key Risks to Monitor
- NPL Ratio at 5.42%: If this crosses 7%, banking profits will take a significant hit and drag the entire index down given banks represent 24.55% of market cap
- Trade Deficit at NPR 955 Billion: Persistent deficit could pressure the exchange rate and reduce foreign reserves over time
- Hydropower Oversupply: The -6.15% YoY decline in hydropower sub-index signals investor concern about delayed PPAs and excess capacity relative to domestic demand
- Finance Company Weakness: The -16.01% decline could indicate structural problems in smaller financial institutions — monitor NRB merger directives
- Global Interest Rate Environment: If major central banks raise rates, it could reduce capital flows to frontier markets like Nepal and increase pressure on NRB to tighten
Tools and Resources for Daily NEPSE Analysis
- Nepse Trading (nepsetrading.com): AI-powered buy/sell signals, real-time screener, technical analysis charts, smart money tracker, and broker analysis tools
- NEPSE Official (nepalstock.com.np): Official trading data, floor sheet, and company announcements
- NRB (nrb.org.np): Monetary policy updates, BFI indicators, macroeconomic data
- CDSC (cdsc.com.np): Demat account services, MeroShare for IPO applications
- SEBON (sebon.gov.np): Regulatory updates, IPO approvals, and compliance information