Market Sentiment Strengthens: NEPSE Crosses 2700 Again, Hints of Morning Star, Month-End Pressure Easing

Nepal's stock market has once again taken an optimistic turn. After a brief pause in its recent rally that began around mid-Asar (early July), the NEPSE index has resumed its upward trajectory. On Wednesday, the index climbed by 22.04 points to close at 2705.90, crossing the psychologically important 2700 mark. This uptrend during the final month of the fiscal year is notable, as the market generally remains sluggish around this time. The improvement seen since mid-Asar suggests that the market could remain bullish heading into Shrawan and Bhadra (mid-July to mid-September), historically strong months for the NEPSE.

Wednesday’s trading volume stood above NPR 7.45 billion—about NPR 1 billion more than the previous day's NPR 6.50 billion. This significant increase reflects renewed liquidity and growing investor confidence. Typically, a rise in both index value and trading volume signals a healthy and sustainable trend, especially if supported by sector-wide movement.

Out of 13 sectors, 11 posted gains. The banking sub-index rose by 1.68%, leading the market. Given the banking sector’s large share of market capitalization, its strength often reflects the broader market’s health. The investment sub-index rose by over 1%, while the manufacturing and processing sector saw nearly 1% gains. Only the finance and mutual fund sub-indices recorded marginal losses, which is seen as normal market behavior.

Among top gainers, Barun Hydropower led with a 6.21% price increase. Panchakanya Mai Hydropower also saw a rise of over 4%. These gains highlight growing investor interest in the hydropower sector. On the downside, Green Development Bank fell by 4.41%, becoming the day’s top loser—showing that not all stocks participated in the rally, and some correction remained.

Radhi Power topped in terms of trading volume, with over NPR 467 million worth of transactions. It was followed by Butwal Power Company and NRN Infrastructure & Development, with trading volumes exceeding NPR 360 million and NPR 350 million, respectively.

According to analysts, as the fiscal year nears its end, focus shifts toward upcoming monetary policy decisions. Investors expect interest rate adjustments, improved liquidity, and a boost in credit flow. These expectations have contributed to the current market optimism.

In summary, NEPSE climbing past 2700 again, increasing daily turnover, broad-based sectoral gains, and strong price momentum in selective stocks point toward a possible trend reversal. If this continues, the months ahead could be pivotal for the market. Still, experts urge investors to remain cautious and base decisions on technical and fundamental analyses rather than speculation.

Technical Analysis: Morning Star Signals Uptrend Continuation

From a technical standpoint, NEPSE has formed a strong uptrend after bouncing off the 2600 zone, which acted as a solid support level. The index recently broke above its 200-day moving average and is now testing a major resistance zone.

The previous trading session had formed a Doji candle, indicating market indecision. However, today’s candle closed above the Doji’s high, forming a bullish continuation pattern known as a Morning Star. While today’s candle didn’t close above the high of the first red candle, it did close above 50% of its body—qualifying it as a medium bullish Morning Star, signaling further potential upside.

Though a new Higher High (HH) hasn't yet formed, the structure and momentum (as shown by the RSI at 63) suggest that one may be forming soon. The RSI level indicates strong but not overbought momentum, reinforcing the bullish outlook.

The major thrust today came from the banking sector, which carried both momentum and volume—signaling institutional participation. The index's ability to sustain above the 200MA and test its upper resistance zone supports a continuation of this uptrend.

Broker Analysis: Mixed Activity, Broker 55 Dominates

Looking at broker activity, out of the top 10 highest turnover brokers, six had more sell transactions compared to buys, while four brokers bought more than they sold. Broker no. 55 continued to dominate with nearly NPR 1 billion in turnover today. It executed buy orders worth NPR 560 million and sell orders worth NPR 430 million.