Banking stocks are showing signs of relative strength even as the broader stock market struggles to regain momentum. While the benchmark Nepse index has repeatedly faced resistance around 2,700, the banking sub-index has similarly struggled to break above 1,600.

The two indices are therefore facing resistance at different levels, but their technical patterns suggest contrasting underlying trends. Nepse has repeatedly failed to move decisively past 2,700 in recent weeks, while the banking index is testing the 1,600 threshold after over two years.

The banking sub-index last stood above 1,600 on October 29. It returned to the 1,600 range this year but failed to sustain the momentum and subsequently retreated. It has since struggled to break above the level, although it has also avoided a steep decline.

On Wednesday, the sub-index fell 13 points to close at 1,588. Despite the pullback, brokers say banking stocks continue to attract investor interest, supported in part by improving financial results.

“Banks have recently published their financial statements for the first quarter, through mid-October. Their profits have increased as loan recovery has improved. Investor interest in the banking sector has therefore not diminished,” said Bharat Ranabhat, president of the Stock Brokers Association of Nepal.

The overall stability of the market has also helped sustain investor interest in banking stocks, he said.

Nepse has struggled to establish a clear trend since the beginning of the week. Brokers attribute this partly to political developments that have kept investors cautious. With the Tihar festival approaching, investors also appear reluctant to commit aggressively to the market.

Banks’ share of market turnover declines

Despite maintaining a relatively strong presence in the market, commercial banks have seen their share of total trading turnover fluctuate.

Data from the past five trading sessions show that commercial banks accounted for around 27 percent of total market turnover. Their contribution, however, dropped to 16 percent on Wednesday.

Of the Rs7.37 billion worth of shares traded across listed companies that day, commercial banks accounted for Rs1.22 billion.

The decline was partly due to a surge in trading of Nepal Reinsurance Company and Himalayan Reinsurance Company amid investor expectations that the two companies could issue rights shares.

Himalayan Reinsurance recorded turnover of Rs360 million, while Nepal Reinsurance accounted for Rs70 million. Combined, the two companies contributed nearly 6 percent of the market’s total turnover.

The shift suggests that trading activity was being concentrated in a few companies outside the commercial banking sector, reducing banks’ share of overall turnover. It does not necessarily indicate a broad-based withdrawal of investor interest from banking stocks.

Moving averages point to diverging market trends

The contrasting behaviour of Nepse and the banking sub-index is also evident in their moving average patterns, which are commonly used to assess the direction and strength of market trends.

Analysts often compare the 50-day and 200-day moving averages to assess shorter-term momentum against the longer-term trend.

For Nepse, the 50-day moving average remains below the 200-day average, signalling a bearish longer-term trend and suggesting that the broader market has yet to establish a sustained recovery.

The banking sub-index, by contrast, has its 50-day moving average above the 200-day average. This indicates a bullish technical trend and suggests that banking stocks have maintained stronger momentum than the wider market.

The divergence is significant because it suggests that banking stocks are showing stronger momentum than the broader market, which has remained relatively stable. However, the bullish moving-average pattern has yet to translate into a decisive break above the resistance level around 1,600.

That distinction matters. Moving averages indicate the prevailing trend rather than guarantee its continuation, while resistance levels show where selling pressure has so far prevented further gains. The banking index’s ability to hold above its recent support levels and break through 1,600 will be important in determining whether its relative strength can translate into further gains.

Based on current chart patterns, Nepse could find support in the 2,630-2,657 range before attempting another upward move. The banking sub-index, meanwhile, is likely to seek support around 1,569.

For now, the technical picture suggests two different market conditions: a broader market still struggling to shake off its bearish trend and a banking sector showing stronger underlying momentum but yet to overcome a key resistance level.