The Nepal Stock Exchange (Nepse) showed pockets of strength last week, but falling turnover and widespread sectoral losses suggest investors remain cautious about a broader recovery.

The benchmark index fell 7.35 points, or 0.28 percent, to 2,591.80 in the five-session week ending October 9. Market capitalisation declined by around Rs20 billion to Rs4.45 trillion, while turnover fell 18.1 percent to Rs18.44 billion from Rs22.51 billion the previous week. Average daily turnover dropped to Rs3.69 billion from around Rs4.5 billion.

Investor and market analyst Subas Chandra Dhungana attributed the slowdown partly to reduced participation during Dashain, quarterly margin-loan interest payments due in mid-October and mutual funds selling shares to manage their quarterly net asset values.

Banking gains as hydropower dominates turnover

The banking sub-index rose 1.15 percent to 1,517.25, contrasting with declines in investment (1.37 percent), trading (1.31 percent), microfinance (1.27 percent) and manufacturing and processing (1.08 percent).

Hydropower stocks attracted concentrated trading interest. Ghalemdi Hydro recorded Rs1.25 billion in turnover, with more than 4.4 million shares traded. Himal Dolakha Hydropower and Peoples Hydropower also saw heavy activity.

Banking’s gain indicates relative price strength, while hydropower’s turnover highlights continued interest in selected stocks. However, high trading volume alone cannot establish whether investors are accumulating shares or taking profits. The weakness across most sectors also suggests that buying has yet to broaden enough to support a sustained market rally.

Policy changes and turnover key to recovery

Dhungana said Nepse’s ability to hold near the psychologically important 2,600 level was encouraging. He also expects a recent change to Securities Board of Nepal disclosure rules to potentially improve sentiment.

Previously, shareholders selling at least 5 percent of a company’s shares had to notify the company 15 days in advance, with the notice disclosed through Nepse. The revised rule raises the threshold to 15 percent and shortens the notice period to five trading days.

Dhungana said the market could gradually rise if institutional investors returned and daily turnover exceeded Rs5 billion. Stronger trading activity accompanied by broader sectoral gains would provide firmer evidence of recovery.

Technical signals remain neutral

The Relative Strength Index stands at 48.69, close to the neutral midpoint of 50, while the Moving Average Convergence Divergence indicator shows subdued, flat-to-negative momentum. Both suggest the market lacks a clear direction.

Holding near 2,600 is a positive sign, Dhungana said, but a sustained recovery would require stronger turnover and broader buying. For now, banking gains and heavy trading in select hydropower stocks have yet to translate into a broader market recovery.