NEPSE Suffers Heavy Fall Again — Flexible Policies Fail to Lift Sentiment; Political Instability and Large Broker Sell-Offs Deepen Pressure

Nepal’s stock market experienced another sharp decline on Sunday despite flexible policy measures introduced by the government and the Nepal Rastra Bank (NRB). The recent policy relief failed to restore investor confidence, as political uncertainty and heavy selling from major brokers continued to dominate the market.

NEPSE Drops 78 Points — Turnover Increases Despite Decline

On the first trading day of the week, the NEPSE Index plunged by 78.83 points (3.24%) to close at 2,503.35, marking one of the biggest single-day drops in recent months.
Despite the fall, total turnover rose to NPR 6.7 billion, with over 14.3 million shares of 324 companies traded.
Compared to Thursday’s NPR 5.27 billion, turnover increased by about NPR 1.43 billion, suggesting that many investors were selling at higher levels to cash out amid growing uncertainty.

Political Instability Weakens Market Confidence

Analysts attribute the ongoing decline not just to policy factors but largely to political instability and uncertainty.
The recent Gen-Z protests, government reshuffles, and unclear election timelines have severely impacted investor sentiment.
Experts say, “Market stability cannot exist without political stability.”
Investors are now seeking credibility and consistency more than policy reform.
Frequent government changes have weakened long-term policy implementation and directly affected market psychology.

NRB’s Policy Relief Brings Short-Term Hope, Not Stability

Last Wednesday, the NRB removed the NPR 250 million cap on margin loans, allowing investors to borrow more freely against shares.
The central bank also allowed banks and financial institutions to invest in shares for up to six months, removing the previous one-year restriction.
In addition, the 20% annual sell limit on long-term holdings was scrapped.

However, these measures provided only temporary optimism — the NEPSE surged 4% the following day but quickly resumed its downtrend. This clearly shows that policy reforms alone cannot restore investor confidence without political clarity and stability.

Capital Market Reform Committee Suggestions Still on Paper

The Capital Market Reform Committee had submitted several key recommendations, including:

• Removing limits on margin lending,

• Allowing greater institutional participation,

• Introducing new financial instruments,

• Restructuring and partial privatization of NEPSE,

• Ensuring transparency and regulatory independence.

Although the Ministry of Finance instructed immediate implementation, no tangible improvement has been seen in the market. Many investors call these measures “paper reforms without execution.”

15-Minute Average Rule Removed Amid Controversy

Responding to investor pressure, the government abolished the 15-minute average rule for NEPSE index calculation — which had been implemented only six months ago.
While some analysts believe the rule helped control volatility, others argued it had become a barrier to market growth.
The move satisfied short-term demands but failed to ensure long-term transparency or stability.

Gen-Z Protests and Natural Disasters Add Economic Pressure

The Gen-Z demonstrations and subsequent floods and landslides across Nepal have further weakened the economy.
According to the Ministry of Urban Development, 440 government buildings were damaged, including 134 completely destroyed, 176 partially damaged, and 130 slightly affected.

The Insurance Board of Nepal reported insurance claims worth NPR 23.22 billion, with payments totaling NPR 1.58 billion already disbursed by non-life insurers.
These crises have added to the uncertainty, pushing investors to focus more on risk management and capital protection rather than new investments.

Technical Analysis: Market Still in a Bearish Zone

Based on Sunday’s daily chart, the RSI (Relative Strength Index) dropped to 32.21, indicating the market is nearing the oversold zone (below 30).
While this suggests a potential short-term rebound, the overall trend remains strongly bearish.

The Ichimoku Cloud analysis shows NEPSE trading below the cloud, confirming sustained bearish momentum.
Immediate resistance levels are at 2,586 and 2,620, with a major resistance range between 2,650–2,755. Unless NEPSE closes above these levels, a lasting recovery remains unlikely.

At the same time, the 2,500 level is a critical support zone. If it breaks, the next supports lie near 2,480 and 2,430.
Rising trading volume during a market decline reflects strong selling pressure, and the continuation of “Lower Highs” and “Lower Lows” confirms that the market structure remains bearish.

NRB and government policy changes have brought short-term relief but not stability.
The current decline is driven more by political and psychological factors than technical ones.
To revive investor morale, political clarity, transparent execution, and trust among regulators, government, and investors are crucial.

If the 2,500 support level holds, a short-term rebound is possible; but if it breaks, NEPSE could slide further toward 2,400 points.