The Nepal Stock Exchange (Nepse) extended its gains this week, with manufacturing, trading, and hydropower stocks driving the benchmark index higher. Turnover slightly dipped after last week's higher activity, which was fuelled by regulatory-driven debenture sales.

The benchmark index gained 57.06 points, or 2.13 percent, to close at 2,734.60 points on Friday, compared with 2,677.54 points at the end of the previous week.

The Sensitive Index, which tracks Class 'A' stocks, rose 5.09 points, or 1.09 percent, to settle at 473.47 points. The Float Index increased 3.37 points, or 1.83 percent, to 187.40 points, while the Sensitive Float Index climbed 1.97 points, or 1.24 percent, to 160.53 points.

Reflecting the broader market recovery, total market capitalisation increased by Rs 100 billion, or 2.17 percent, during the week. Market capitalisation rose from Rs 4.60 trillion last week to Rs 4.70 trillion at the close of trading on Thursday.

Trading activity, however, moderated slightly. Weekly turnover fell 2.95 percent to Rs 28.33 billion from Rs 29.19 billion a week earlier. The decline came after the previous week's turnover received support from regulatory-driven debenture sales.

Average daily turnover stood at Rs 5.67 billion across five trading sessions, compared with Rs 5.84 billion per day in the previous week.

Of the 13 sub-indices traded on the exchange, 11 closed higher, while two ended in negative territory.

The Manufacturing and Processing sub-index recorded the biggest gain, rising 436.32 points, or 4.11 percent, to 11,049.18 points. The Trading sub-index followed with a gain of 119.82 points, or 3.60 percent, closing at 3,449.02 points. The Hydropower sub-index increased 116.72 points, or 3.15 percent, to 3,816.33 points.

The Mutual Fund sub-index was the biggest decliner, falling 0.51 points, or 2.35 percent, to 21.21 points. The Non-Life Insurance sub-index also slipped 34.41 points, or 0.31 percent, to 11,008.71 points.

Market analysts said non-life insurance companies faced selling pressure following concerns over potential losses from insurance claims related to damages during last September's Gen Z protests.

Everest Colour Limited emerged as the top gainer of the week, rising 101.02 percent to Rs 651.10 after hitting the upper circuit. Salapa Bikas Bank Limited gained 26.91 percent to Rs 1,160, followed by Snow Rivers Limited, which climbed 21.92 percent to Rs 979, and Ridge Line Energy Limited, which rose 21.40 percent to Rs 970.

Kutheli Bukhari Small Hydropower was the biggest loser, declining 12.06 percent to Rs 1,050. Makar Jitumaya Suri Hydropower fell 6.03 percent to Rs 450, while Narayani Development Bank dropped 4.73 percent to Rs 786.

Energy and manufacturing companies dominated weekly trading activity.

Ridi Power recorded the highest turnover of Rs 1.75 billion, with 4.66 million shares traded during the week. Its share price closed at Rs 370, gaining 5.87 percent.

Ankhu Khola Jalvidhyut Company recorded the second-highest turnover at Rs 1.31 billion, with 3.44 million shares changing hands. The company closed at Rs 379, up 4.41 percent.

Reliance Spinning Mills recorded a turnover of Rs 1.22 billion, with its share price rising 9.19 percent to Rs 3,494.

Investor and market analyst Subas Chandra Dhungana said the market could continue its upward trend during the July-August period, supported by seasonal market cycles, dividend announcements, the federal budget, monetary policy and the government's efforts to promote the capital market.

However, he said a sustained rally would require stronger trading activity, with daily turnover crossing around Rs 7 billion.

"Smart money does not appear to have entered the market aggressively yet," Dhungana said, adding that large investors were adopting a wait-and-see approach amid ongoing investigations into stock market-related incidents.

He said the long-term outlook remained positive, citing the government's favourable stance towards the capital market.