NEPSE, which had remained completely green throughout the previous trading week, came under unexpected heavy pressure on Sunday. After climbing more than 115 points in five consecutive sessions, the index faced a strong wave of profit booking, leading to a notable decline on the first trading day of the week. Many investors who had accumulated gains over the past sessions opted to secure profits, resulting in a sharp correction of 26.51 points, bringing the index down to 2,649.52 points.

From Monday to Thursday last week, NEPSE had consistently moved upward, gaining 33.92, 50.44, 5.32, 9.61, and 10.43 points respectively. Within just five sessions, the index surged by 115.72 points, closing at 2,673.03 points on Thursday—its weekly high. However, the bullish momentum fizzled this Sunday as investors collectively turned to profit booking. Analysts note that such synchronized selling after a steep rise is a common market behavior, often driven by the desire to lock in short-term gains.

Interestingly, market turnover increased even as the index declined—a sign that the selling pressure was strong. While Thursday recorded a turnover of Rs. 6.66 billion, Sunday’s trading volume rose to Rs. 7.08 billion. A rising turnover alongside a falling index typically indicates that the sell-side has become dominant, and market sentiment has turned cautious. Analysts commented that the sudden increase in profit-booking activity contributed to a shift in investor psychology, which turned sharply negative during intraday trading.

Out of the 13 trading sub-indices, 11 closed in red. The Investment sub-index was the most affected, falling by 1.48%, reflecting broader sectoral weakness. Only two sub-indices managed to remain positive. Despite the overall market decline, five stocks hit positive circuit levels, providing some optimism. These included Sagar Distillery, NIFRA Green Energy Debenture (6% circuit), Swastik Laghubitta, Jhapa Energy, and Srinagar Agritech, each closing at their upper circuit levels. On the other hand, the 10% NIMB Debenture 2090 was the worst performer, plunging 8.99%.

In terms of turnover, Himalayan Re-Insurance topped the chart with Rs. 230.5 million in trading value, followed by several large-cap insurers and financial institutions. The overall trade pattern suggests that investors preferred to remain cautious, gradually reducing exposure while monitoring upcoming macroeconomic events.

Market Sentiment Driven by Anticipation of Monetary Policy Review

Adding to the selling pressure was the rising uncertainty ahead of the upcoming Monetary Policy Review. Nepal Rastra Bank is set to release the first-quarter review of the current fiscal year’s monetary policy on Monday (Mangsir 15). As per the regulatory requirement, the quarterly review must be published within 45 days after the end of each quarter, pushing NRB to finalize the document this week.

Investors, banks, insurers, and market participants are eagerly waiting to see the direction of the review. Despite low interest rates and abundant liquidity in the financial system, credit expansion has remained sluggish. Over Rs. 1.1 trillion in excess liquidity is currently idle in the banking sector, reflecting weak loan demand and a lack of strong economic activities. This imbalance has heightened investor curiosity about potential policy adjustments that might address the issue.

NRB has been frequently absorbing excess liquidity to prevent overheating, especially at a time when remittance inflows have been increasing steadily. With remittance inflow growing further, bankers fear that unused liquidity may expand even more in the coming months. Therefore, the upcoming review holds significant importance in determining how effectively the central bank will facilitate credit flow into the real economy.

Bankers expect the review to include provisions that encourage loan expansion and support capital markets, especially measures that ease the pressure created by high provisioning requirements. Some institutions are currently stressed due to elevated provisioning norms, prompting expectations of regulatory relaxation. Analysts also believe that if the review introduces capital-market-friendly policies and clarity in lending norms, it could help restore investor confidence and inject positive energy into the stock market.

Overall, Sunday’s fall in NEPSE is seen as a combined result of profit booking, rising turnover-driven selling pressure, and psychological caution influenced by the upcoming monetary policy review. The future direction of the market now largely hinges on the tone, decisions, and regulatory adjustments to be announced in Monday’s monetary policy review.

Technical Analysis: NEPSE Fails to Break 200-MA Resistance

From a technical perspective, NEPSE opened with slight positivity but later weakened and closed in negative territory. The index once again tested the 200-day Moving Average (200MA)—one of the most critical long-term technical indicators—but failed to break above it. This rejection triggered additional selling and pulled the index downward.

According to technical analyst Ajit Khanal, NEPSE has historically shown strong reactions—both support and resistance—around the 200MA. Sunday’s trading was no exception. As soon as NEPSE touched the 200MA region, supply pressure increased, and the index was unable to sustain higher levels, reversing sharply from the resistance zone.

In the past few weeks, the index had formed an Ascending Triangle pattern, which generally signals a potential bullish breakout. However, instead of a breakout, NEPSE merely retested the triangle neckline and then reversed downwards. Had NEPSE decisively closed above the 200MA, it could have triggered a strong bullish momentum. But the failure to break the resistance resulted in a bearish close marked by a long red candlestick.

Candle analysis shows that the index formed a red candle exactly in the expected reversal zone, confirming technical weakness. Moreover, the fact that turnover increased while a red candle formed is considered bearish, indicating strong selling dominance. Large red candles accompanied by higher volume often signal aggressive profit booking and weakening investor sentiment.

The index had touched its intraday high around noon, but the momentum could not sustain. From 12:45 PM onward, NEPSE displayed a sharp negative reaction. As major large-cap stocks came under pressure, the overall index rapidly weakened, dragging down the entire market structure.

Sector-wise turnover analysis reveals that hydropower contributed nearly 40% of the day’s total turnover, becoming the dominant sector. Bank and life insurance sectors also saw slight increases in their turnover, while other sectors remained relatively quiet.

Broker Analysis: Mixed Buy-Sell Patterns Among Top Brokers

Looking at broker-wise trading patterns, the behavior of the top 10 brokers provided additional insights. Among them, five brokers recorded higher selling than buying, while the remaining five recorded higher buying. This indicates a balanced but uncertain sentiment, with neither buyers nor sellers decisively dominating the market.