NEPSE Index Dips Nearly 2% Weekly, Market Capitalization Shrinks by NPR 84 Billion Amidst Bearish Sentiment

The Nepal Stock Exchange (NEPSE) index concluded the trading week with a notable decline, shedding approximately 2% of its value. After closing at 2734.60 points last week, the index registered a decrease of 1.79%, or 49.06 points, to settle at 2685.54 points by the end of the current trading period. This downturn reflects a prevailing cautious sentiment among investors, marking a challenging week for the Nepalese equity market.

Throughout the five trading days of the week, the market experienced a predominantly bearish trend. NEPSE recorded declines on four out of the five trading sessions, with only one day witnessing an upward movement before closing. This consistent downward pressure contributed significantly to the overall weekly loss. Complementing the main index's performance, other key indicators also showed negative movements: the Sensitive Index dropped by 3.34 points, the Float Index decreased by 2.81 points, and the Sensitive Float Index fell by 1.05 points, further underscoring the broad-based market weakness.

Beyond the index performance, the week also saw a significant reduction in market activity. The average daily turnover plummeted by 23.48% compared to the previous week. Last week, the market recorded an average daily share transaction value of NPR 5.66 billion, which sharply contracted to an average of NPR 4.33 billion this week. This decline in trading volume, alongside a 19% reduction in the average daily number of shares traded and an 18.81% drop in the average daily number of transactions, signals reduced investor participation and a potential wait-and-see approach from market participants. Such a contraction in liquidity often accompanies periods of market uncertainty.

The overall market capitalization of NEPSE also mirrored the index's decline, shrinking by approximately 2%. From NPR 46.99 trillion at the close of the previous week, the total market capitalization decreased by NPR 84 billion, settling at NPR 46.15 trillion. This substantial reduction in market wealth highlights the impact of the week's bearish trend on investor portfolios.

An analysis of the thirteen sub-groups reveals a stark picture: only one sub-group managed to post gains, while the remaining twelve experienced declines. The Banking sub-group emerged as the sole gainer, with its index increasing by a modest 0.15%. Closing at 1489.12 points last week, the banking index rose by 2.17 points to reach 1491.29 points this week. This resilience in the banking sector, often considered a defensive play, suggests a flight to perceived safety amidst broader market volatility.

Conversely, the Manufacturing and Processing sub-group bore the brunt of the market downturn, recording the steepest decline of 3.53%. Its index, which closed at 11,049.18 points last week, plummeted by 389.63 points to 10,659.55 points. This significant drop, both in percentage and absolute terms, indicates particular pressure on industrial and processing companies, possibly due to broader economic factors or sector-specific challenges.

In terms of individual stock performance, Everest Color saw an extraordinary surge, with its share price increasing by a remarkable 101.09%. Trading at NPR 641.10 last week, the company's shares closed at NPR 1,309.30 this week, indicating strong investor interest or speculative activity. Saptakoshi Development Bank also posted a healthy gain of 6.5%. On the losing end, Corporate Development Bank experienced the sharpest decline, with its share price falling by 27.70%. Similarly, Atmanirbhar Laghubitta Bittiya Sanstha saw its share price drop by over 15%, reflecting significant selling pressure in these specific counters.

Floorsheet analysis for the week provided insights into investor preferences. Nadep Laghubitta Bittiya Sanstha, Asha Laghubitta Bittiya Sanstha, and Laxmi Unnati Kosh were among the most popular buy stocks, indicating sustained demand. Conversely, Forward Microfinance Laghubitta Bittiya Sanstha, Makar Jitumaya Suri Hydropower, and Mahila Laghubitta Bittiya Sanstha topped the list of most popular sell stocks, suggesting profit-taking or a shift away from these holdings. The overall market sentiment for the week was clearly bearish, with declines across most sectors and a significant reduction in trading activity, painting a cautious outlook for the near term.