The Nepal Stock Exchange (NEPSE) edged higher during the shortened trading week from September 7 to 11, with the benchmark index gaining 16.72 points, or 0.66 percent, to close at 2,559.49 points.

Trading was limited to four sessions after the market was closed on September 8 for a public holiday. The previous week also had four trading sessions, allowing a direct comparison of market activity.

The modest rise in the index came alongside a significant increase in turnover. Weekly turnover rose 26.07 percent to Rs16.15 billion from Rs12.81 billion in the previous week. Because both weeks had four sessions, the increase reflects higher trading activity rather than a difference in the number of trading days.

Average daily turnover increased to Rs4.04 billion from Rs3.20 billion, also a rise of about 26 percent. The increase suggests that liquidity and investor participation are improving as the market recovers from recent weakness.

The stronger turnover is an encouraging signal because the index gained while trading activity also increased. However, the level remains below what some market analysts consider necessary for a sustained rally. For the coming week, analysts will watch whether daily turnover can stay above Rs4 billion and increase as NEPSE approaches the 2,580 resistance level, which would strengthen the case for a sustained recovery.

Market analyst Shakti Koirala said NEPSE appeared to be on a positive short-term trend after absorbing the negative sentiment created by the recent Bhotekoshi river flood disaster. The increase in trading volume compared with the previous week was another positive signal, he said.

Koirala also pointed to the index holding above the 2,480-2,500 support zone as an encouraging sign. He expects hydropower, commercial banking, and manufacturing and processing stocks to attract attention in the coming sessions because of their relative strength.

The benchmark Sensitive Index, which tracks Class A stocks, rose 4.42 points, or 0.98 percent, to 453.92 points. The Float Index gained 1.35 points, or 0.77 percent, to 175.70, while the Sensitive Float Index advanced 1.48 points, or 0.98 percent, to 153.21.

Sector performance was mixed, with six of the 13 sectoral indices advancing and seven declining.

Non-Life Insurance was the strongest performer, rising 1.41 percent, or 131.36 points, to 9,422.06. Banking gained 1.30 percent, Hydropower 1.28 percent and Life Insurance 1.06 percent.

Finance was the biggest loser, falling 2.72 percent, or 61.27 points, to 2,193.75. Development Bank declined 1.55 percent and Trading fell 0.55 percent.

Liberty Energy Company was the week's biggest gainer, climbing 20.10 percent to Rs252.20. Pure Energy rose 15.41 percent to Rs764, while Sarvottam Paints gained 13.22 percent to Rs1,370.

Sindhu Bikash Bank was the biggest loser, falling 32.71 percent to Rs394. Emerging Nepal declined 27 percent to Rs593.90 and Janaki Finance dropped 24.10 percent to Rs280.

Reliance Spinning Mills recorded the highest individual turnover at Rs1.04 billion, closing at Rs2,930. Liberty Energy led trading volume, with 3.53 million shares changing hands.

Technically, NEPSE appears to be in the early stages of a rebound from the 2,500 support region. The rising RSI indicates improving short-term buying momentum, while the fading MACD histogram suggests that the recovery has yet to develop strong momentum.

The index, however, remains below its 20-day moving average of 2,578 and 50-day moving average of 2,623. A sustained move above 2,580, backed by higher turnover, would provide a stronger signal that the market could advance towards 2,625. The 2,500 region remains the key support level.

For the coming week, turnover will therefore be as important as the index itself. The 26 percent rise in average daily turnover is encouraging, especially since both the current and previous weeks had four trading sessions. But the market is still generating only around Rs4 billion in daily turnover, well below the Rs7 billion level that analysts say would indicate stronger participation.

Market analyst Jagannath Dhungel said recent initiatives by the finance minister to support the capital market, the prime minister’s meetings with industrialists, and efforts by the Securities Board of Nepal to strengthen the market had sent positive signals that could help drive the market higher.

But he said substantial institutional or ‘smart’ money had yet to enter the market. Daily turnover of around Rs3 billion to Rs4 billion remained insufficient for a sustained advance, he said, adding that turnover would need to rise to at least Rs7 billion a day for a stronger and more durable upward move.

Investor confidence has not fully recovered, Dhungel said. He expects hydropower, microfinance and commercial banking stocks to attract interest, particularly because of their potential to provide better dividends.