Illustration: Rachel Mendelson/WSJ, iStock
There are few things more unnerving to investors than a crowd heading in different directions at once. In the last month Nepal’s stockmarket has provided a case study in dissonance. Volumes are soaring yet the index is adrift. Daily turnover has surged: NPR 12.9bn on June 16th alone, the highest in 20 trading days. But prices are going nowhere. The NEPSE index closed that day at 2,658.66, barely changed from a week prior, and still 11% below its 52-week high. For a market long starved of liquidity, this should be good news.
Yet the soaring tide seems to be washing over increasingly reluctant buyers. Since peaking at 2,726.60 on June 2nd the market has slipped steadily, failing to break out of a tight band between 2,630 and 2,670. Even modest rallies are fizzling out: of the past ten trading sessions, five saw the index fall on heavy volume, what chart-watchers call “distribution days”, a euphemism for big-money selling.
Technicians are fidgeting. A proper breakout, they say, needs a “follow-through day”: a gain of more than 1.5%, with rising turnover, within a week or two of a local low. But no such event has materialised. The closest was May 20th, when the index jumped 1.86% on unremarkable volume. In the sessions that followed, momentum withered. Without confirmation, rallies look like false starts.
The pattern suggests institutional investors are trimming positions while retail punters chase shadows. When prices rise on low volume, it may signal hope. When they fall on high volume, it screams retreat. On June 11st and 12th, the NEPSE fell 0.51% and 0.34% respectively, as turnover surged above 20m shares.
Meanwhile the daily number of transactions climbed to over 100,000, a level not seen since the height of last year’s rally. Everyone is trading but few are committing. Optimists argue the market is merely pausing, not peaking. Turnover may be rising, they say, because new money is entering, even if it has yet to find a home. But that thesis is looking increasingly wobbly.
Nepali investors are hardly alone in their confusion. Global markets, too, are jittery as America’s Federal Reserve dithers over rate cuts and trade tensions cast a shadow over the world economy. But in a small frontier market like Nepal, volatility tends to amplify rather than smooth uncertainty. Add in opaque governance at the stock exchange itself and it’s little wonder conviction is scarce.
What comes next will depend less on charts than catalysts. A breakout above 2,700 with volume could restore animal spirits. A breach below 2,640 might trigger a stampede for the exits. The market is in limbo for now: busy but indecisive, liquid but listless. Traders are active. Investors, it seems, are elsewhere. ■
