Is NEPSE's Trading Volume Justifying the Rally? Analysts Express Caution
As NEPSE nears the 3,000 mark, analysts warn that the current trading volume is not robust enough to sustain the rally.
Kathmandu, July 23, 2025 | Nepalytix — The Nepal Stock Exchange (NEPSE) reached 2,973.70 on Tuesday, nearing a one-year high. However, market analysts have raised concerns over the subdued trading volume, which they say may not be sufficient to sustain the bullish momentum.
Last year, when NEPSE touched similar levels, daily turnover exceeded NPR 30 billion. In contrast, this week’s turnover remains around NPR 20 billion, raising red flags for seasoned market watchers.
Subash Chandra Dhungana, a stock market analyst, remarked,
“An 80-point rally should ideally attract over NPR 22 billion in daily volume. We’ve seen NEPSE hit 3050 with close to NPR 30 billion in transactions back then.”
Dhungana warns that when a rally happens without proportional volume, it may signal market weakness or speculative behavior. He emphasized that gradual volume growth is key to validating an uptrend.
“If the volume consistently increases with each up-move, it strengthens the rally. But if the index rises on lower volume than before, we should be cautious,” he added.
Dhungana also cautioned against sudden spikes in volume followed by steep declines, referencing past movements where the index failed to hold above 3,200 after massive trades were not sustained.
“When NEPSE jumped to 3,050, turnover crossed NPR 30B, but fell to below NPR 20B within days. Such volatility indicates the market lacks strong hands.”
He believes that to sustain levels above 3,200, the market will require higher average volume, ideally above NPR 15 billion per day.
Another technical analyst, Binod Maharjan, echoed this sentiment, stating:
“To break past old highs, volume must also surpass previous levels. NEPSE rose by nearly 81 points today, but turnover was just NPR 20.08B.”
🔍 Context & Background:
During the past year:
NEPSE peaked at 3,036 with NPR 29.95B turnover.
A second rally toward 3,200 saw over NPR 21B in daily volume.
Long bearish spells often kept turnover below NPR 20B.
The current rally is partly attributed to:
Market optimism following Finance Minister Bishnu Poudel’s appointment.
Regulatory leniency in the monetary policy, allowing commercial banks to sell up to 20% of their stock holdings within a year.
A surge in commercial banking stocks and continued gains in hydropower and large-cap investment firms.
Still, analysts remain cautious.
“If the fundamentals aren’t matched by trading activity, the rally may not last,” said Maharjan.
As NEPSE rebounds from lows near 2,400, factors like interest rate stability, liquidity, and investor expectations around policy clarity will determine whether the market can finally breach and sustain above 3,000 levels.