Nepal’s stock market witnessed a sharp correction on Sunday, with the Nepal Stock Exchange (NEPSE) index declining by 71.05 points to close at 2,879.11, reversing gains from the previous trading session.

The downturn comes despite the recent formation of a new government led by the Rastriya Swatantra Party (RSP), which had initially raised expectations of a positive market response. However, investor sentiment appeared subdued as broader political developments and uncertainty weighed on market confidence.

Market activity remained robust, with total turnover reaching Rs. 15.03 billion, up from Rs. 12.90 billion recorded in the previous session. The elevated trading volume suggests active participation from both buyers and sellers, even as the market trended downward.

Analysts attribute the decline to multiple factors, including ongoing political tensions following the arrest of former Prime Minister KP Sharma Oli and former Home Minister Ramesh Lekhak. Street protests and heightened political activity have contributed to cautious investor behavior.

Additionally, some market participants appear to be reassessing expectations around newly appointed Finance Minister Swarnim Wagle, while others point to profit booking after the market’s recent rally as a key driver of the correction.

Market breadth remained largely negative, with share prices of 255 companies declining, compared to gains in only 10 stocks, while one remained unchanged.

Despite the broader market decline, a few stocks posted strong gains. Shares of Reliance Spinning Mills, Super Khudi Hydropower, Ridge Line Energy, and Suryakund Hydroelectric hit positive circuit limits, while Bhujung Hydropower recorded a notable gain of 9.98%.

Overall, the sharp drop underscores the sensitivity of Nepal’s equity market to political developments and short-term trading dynamics, even as underlying liquidity and participation remain strong.