The Nepal Stock Exchange (Nepse) index fell by 49.70 points this week, as the market entered a correction phase driven by profit-booking and heightened investor caution following recent gains. The decline signals a pause in upward momentum, amid ongoing investigations and rising volatility, rather than a fundamental reversal of trend.

The bearish sentiment wiped out around Rs 80 billion in investor wealth over the five trading days. Total market capitalisation fell from Rs 4.83 trillion last week to Rs 4.75 trillion, marking a 1.66 percent decline.

Liquidity also weakened significantly. Cumulative weekly turnover stood at Rs 29.388 billion, an 18.31 percent drop from the previous week’s Rs 35.976 billion. The daily average turnover fell to Rs 5.88 billion, down from over Rs 7 billion in the preceding week.

The market remained largely in the red, with almost all sub-indices closing in negative territory. The Others sector led the losses with a 3.54 percent decline, followed by Finance (down 2.88 percent) and Hydropower (down 2.32 percent). The Banking sub-index, often seen as a market stabiliser, fell by 1.71 percent.

The Manufacturing and Processing sector was the sole gainer, posting a marginal increase of 0.14 percent to close at 11,702.19 points.

Palpa Cement Industries and Shikhar Power Development posted extraordinary gains of over 101 percent, closing at Rs 971.40 and Rs 920.10, respectively, largely driven by speculative momentum rather than fundamentals.

Dolti Power emerged as the week’s biggest loser, falling 14.92 percent, followed by SY Panel Nepal Limited, which declined by 9.77 percent.

In terms of turnover, Solu Hydropower Limited led the market with transactions worth Rs 1.48 billion, followed by Reliance Spinning Mills at Rs 1.37 billion.

The Hydropower sector dominated trading activity. National Hydro Power remained the most active scrip, with 4.471 million shares traded, indicating that retail investors continue to concentrate on low-cap, high-volatility stocks despite the broader market correction.

Analyst Ajaya Singh Thapa said the simultaneous decline in turnover and the index suggests a phase of consolidation. He noted that investor sentiment appears shaken following investigations into suspected market manipulation.

“With the market transitioning to a Monday-to-Friday trading schedule and third-quarter financial reports approaching, institutional investors seem to be de-risking, creating a wait-and-see environment,” he said. “Retail investors, meanwhile, appear to be reacting with panic following recent high-profile arrests.”

He added that the market could remain under pressure in the near term due to weak economic prospects and what he described as an “IPO-driven bubble” rather than broad-based growth.

“For sustainable long-term growth, the market needs stronger economic fundamentals,” Thapa said.

From a technical perspective, Immediate support is seen in the 2,742-2,772 range, while resistance lies between 2,835 and 2,865.

The Relative Strength Index (RSI) remains below the 50 mark, indicating a continuing downtrend. The Moving Average Convergence Divergence (MACD) indicator has also moved deeper into negative territory, signalling sustained selling pressure.

“RSI needs to cross above 60 to indicate a return of bullish momentum,” he added.