NEPSE Market Recovery: After 3-Day Fall, Bullish Reversal Pattern Expected

After a continuous three-day decline, the NEPSE index showed a double-digit recovery on Monday. On Saun 13 (July 29), NEPSE had reached a recent high of 3020 points but subsequently dropped by 143 points over the next three trading days, falling to 2858.90 on Sunday. However, Monday's market closed 16.46 points higher at 2875.36, providing a sense of relief to investors.

Analysts suggest this recent decline was merely a technical correction. Profit booking from short-term investors and the psychological resistance around the 3000 level created downward pressure on the market. Monday’s rebound now signals the potential for a trend reversal and renewed momentum.

Despite the uptick, trading volume shrank on Monday. The total turnover declined from NPR 13.07 billion on Sunday to NPR 10.92 billion. Out of 13 sub-indices, 7 closed higher while 6 declined, showing partial market balance.

Fundamental Positives Driving Optimism

The recent monetary policy by Nepal Rastra Bank (NRB) is seen as market-friendly. The interest rate on short-term deposits has dropped to 2.75%, and banking liquidity is ample. Commercial banks are exploring new sectors for credit flow, with the stock market becoming an increasingly attractive avenue.

Furthermore, NRB increased the margin loan cap from NPR 15 crore to NPR 25 crore, enabling investors to borrow more against shares. Public companies are actively publishing their Q4 financial reports, with many reporting improved earnings. This has raised expectations of upcoming dividend announcements, which could inject further bullish sentiment into the market.

ISIN Dispute Adds to Uncertainty

The recent controversy over different ISIN codes for promoter and public shares by CDSC has added temporary confusion and hesitation in the market. However, long-term investors have seen this as a short-term disruption and are using the correction as a buying opportunity.

Technical View: Doji Formed, Morning Star in Sight

A Doji candle formed on Monday, indicating market indecision. If a bullish marubozu candle forms on Tuesday, a Morning Star pattern—a strong bullish reversal signal—could be confirmed.

On Sunday, the market had formed a bearish marubozu candle. Monday's Doji indicates the selling pressure might be weakening. If the market closes above 2890, it will reinforce bullish confirmation. On the downside, 2832 is expected to act as immediate support.

Market Composition Hints Long-Term Interest

Monday's upward move was led by large-cap, mid-cap, and banking sector stocks. Analysts believe this suggests the entry of long-term investors who are positioning ahead of potential dividend announcements and bullish policy momentum.

Top Gainers and Turnover Leaders

Top Gainers:

• Sikles Hydropower: +5.73%

• Shwet Ganga Hydro & Construction

• Bindhyabasini Hydropower: ~+5%

Top Turnover:

Seasonal Factor: Saun–Bhadra Bull Trend

Traditionally, Saun and Bhadra (July–September) are considered bullish months for NEPSE. In 2078 BS, the NEPSE index hit an all-time high of 3200 points during Bhadra. With strong fundamentals, technical support, and market-friendly policy, analysts expect the index to test and potentially break past previous records.

NEPSE is currently hovering near a key technical support zone. Monday’s Doji candle indicates a possible trend reversal. If the Morning Star pattern is confirmed with a strong bullish candle on Tuesday and a close above 2890, momentum will strengthen. If the index breaks the 3050 resistance, it could move toward the 3180–3230 range.

With supportive monetary policy, improved financials, raised credit limits, and historical bullish trends in Saun–Bhadra, NEPSE seems poised for a potential breakout. Despite short-term volatility, long-term prospects remain positive. Investors are advised to make informed decisions based on technical levels and fundamental strength.