Stock Market Shows Modest Gains, Yet Struggles with Broader Momentum

On Thursday, the final trading day of the week, the Nepal Stock Exchange (NEPSE) index showed modest gains, reflecting a market that is still searching for clear direction. After experiencing a decline on Wednesday, the index recovered by 4.59 points to close at 2,640.54, signaling a technical rebound. However, despite the positive movement, market sentiment remained tepid, as the trading volume continued to show signs of caution among investors.

The NEPSE index’s gain on Thursday was largely driven by a recovery from the previous day's correction. However, the overall market's excitement remained subdued. Analysts suggest that this small upward movement should be seen as a temporary technical adjustment rather than the beginning of a robust bullish trend. There was no significant breakout or increase in market activity to support a long-term rally.

Turnover Declines, Reflecting Investor Caution

Despite the increase in the NEPSE index, trading turnover showed a notable decline. On Wednesday, the turnover had reached NPR 5.17 billion, while Thursday’s turnover dropped to NPR 4.90 billion. A total of 328 stocks were traded, with 69,261 transactions involving 10.43 million shares. This drop in turnover indicates that the market is still in a cautious phase, with investors waiting for clearer signals before committing more capital.

The decline in turnover suggests that investor participation remains selective, with a lack of broad-based enthusiasm in the market. While some stocks experienced price increases, overall market participation remained constrained. This caution may stem from the uncertainty around the broader economic and market conditions, which have not yet provided a clear bullish outlook.

Sector Performance: Limited Gains in Select Areas

On the company front, Sanvi Energy saw the highest increase in share price, rising by 8.16 percent. Similarly, SY Panel Nepal rose by more than 5 percent, catching the attention of investors. Other stocks that gained were limited to a few, with increases generally under 5 percent. The performance of declining stocks was also subdued, with most experiencing a loss of less than 4 percent. This indicates a balanced market with neither heavy buying nor selling pressure dominating the sentiment.

Sectoral performance revealed a mixed outlook. Among the 13 sub-indices, 7 showed an increase while 6 declined. Sectors like Banking, Development Banks, Hotels & Tourism, Hydropower, Life Insurance, Manufacturing & Processing, and Non-Life Insurance all showed moderate improvements. However, the gains were concentrated in a few select sectors, further emphasizing that investor interest is not yet broad-based, and the market lacks depth in terms of widespread growth.

Market Facing Strong Resistance, Technical Outlook Remains Neutral

From a technical perspective, the market is still facing strong resistance at the 2,640–2,650 level. The descending trendline, which has been a key factor in keeping the market in check, has not been decisively broken. This suggests that while there is demand at lower levels, the market is struggling to push past resistance.

The Ichimoku Cloud indicator also reflects a neutral market condition, with the index hovering near the cloud. This suggests that the market has not yet entered a strong bullish phase, and the future direction remains uncertain. The gap between the Tenkan-sen and Kijun-sen continues to narrow, indicating that the market could be setting up for a potential breakout or breakdown. The RSI stands at 56, indicating that the market is neither overbought nor oversold, but remains in a range-bound condition.

While the index has managed to recover from its recent lows, technical indicators suggest that the market is still in search of a decisive direction. For a sustained upward trend, the index must break through key resistance levels with stronger volume and broader participation.

Broker Activity: Balanced Buying and Selling with Suspicion of Matching Transactions

Looking at the broker activity, Thursday's market showed a balanced approach to buying and selling. Among the top 10 brokers by turnover, 5 brokers had a higher buying activity, while the other 5 were more active on the selling side.