Hydropower Dominates NEPSE Turnover in Shrawan, Capturing Nearly Half of Market Activity Amidst Sectoral Shifts

The Nepal Stock Exchange (NEPSE) witnessed a significant shift in investor focus during the month of Shrawan (mid-July to mid-August), with the hydropower sector emerging as the undisputed leader in trading activity. According to the latest monthly data released by NEPSE, hydropower companies alone accounted for a staggering 46.17% of the total market turnover, underscoring a concentrated investor interest in this segment.

During Shrawan, the total share turnover on NEPSE amounted to NPR 95.35 billion. Of this, the hydropower sector contributed a substantial NPR 44.02 billion. This represents a remarkable 33.19% increase in hydropower turnover compared to the previous month of Ashar, when the sector recorded NPR 30.49 billion. This surge effectively means that for every NPR 100 traded on the NEPSE floor in Shrawan, approximately NPR 46 was invested in or traded through hydropower company shares. This dominance highlights a strong investor appetite, potentially driven by factors such as perceived growth potential, upcoming project announcements, or the relatively lower price points of many hydropower stocks attracting high volume trading.

Beyond hydropower, the market's trading activity remained highly concentrated within a few key sectors. Commercial banks and the manufacturing & processing sectors followed, collectively contributing to nearly 70% of the total share turnover when combined with hydropower. Commercial banks recorded a turnover of NPR 11.21 billion, representing 11.76% of the total market activity, and saw a healthy 17.23% increase from the previous period. Similarly, the manufacturing & processing sector generated NPR 10.81 billion in turnover, capturing 11.33% of the market share and experiencing a 10.44% growth.

While hydropower led in overall volume, development banks showcased the most impressive growth rate. This sector's turnover surged by an astounding 40.33% in Shrawan, reaching NPR 6.34 billion from NPR 4.52 billion in the preceding month. Despite holding a smaller share of the total market turnover at 6.65%, this rapid expansion suggests heightened speculative interest or a re-evaluation of value within the development banking space. Other sectors like finance and investment also saw modest growth, with finance sector turnover increasing by 2.96% to NPR 5.16 billion and the investment sector growing by 1.84% to NPR 4.53 billion.

Conversely, several sectors experienced significant contractions in trading activity, indicating a clear shift in capital away from these segments. Debenture trading plummeted by a staggering 94.96%, settling at just NPR 1.32 billion. Mutual funds also saw a sharp decline of 57.47% in turnover. Other notable declines included promoter shares (down 30.24%), non-life insurance (down 29.94%), and hotels & tourism (down 24.88%). These contractions suggest a lack of new issues, reduced investor confidence, or a reallocation of funds towards the more active sectors like hydropower and development banks.

Interestingly, despite the robust activity in specific sectors, the overall market turnover for Shrawan decreased by 11.10%, totaling NPR 95.35 billion compared to NPR 107.25 billion in Ashar. However, this decline in total turnover must be viewed in context: the number of trading days in Shrawan was 21, down from 24 in Ashar. Consequently, the average daily turnover actually increased from approximately NPR 4.46 billion to NPR 4.54 billion. This paradox suggests that while less capital might have been circulating overall, the trading that did occur was more concentrated and efficient on a per-day basis.

The data from Shrawan paints a clear picture of a market undergoing significant internal reallocation of capital rather than a massive influx of new funds. The increased turnover in dominant sectors like hydropower and development banks could be attributed to higher trading frequency of existing shares, indicating a shift in investor focus and speculative interest. For investors, this trend underscores the importance of sector-specific analysis and diversification, as market activity is not uniformly distributed, and certain segments are clearly outperforming others in terms of trading volume and growth.