Ask ten people at a Kathmandu tea shop whether the market is bullish, and you will get ten answers based on the same two inputs: where the NEPSE index closed today, and how their own portfolio feels this week. The index is up 30 points, so it is a bull market. A friend just booked a loss, so it is a bear market. This is not analysis. It is mood reporting, and it is exactly how retail investors in Nepal buy the top and sell the bottom.
A bull or bear call in the NEPSE bull-bear market debate should be a checklist output, not a vibe. The index number is the least reliable signal you have, because by the time the headline number confirms a trend, the move that actually mattered already happened underneath it. What you want is a small set of mechanical tests you can run on the same data every week, regardless of how you feel. This article gives you that checklist. The single most reliable tell, the one to weight above the rest, is sustained turnover combined with broad participation. Price follows money and crowds. Not the other way around.
First, the boring definitions (so we agree on terms)
A bull market is a sustained rise in a broad index, conventionally a gain of around 20 percent or more from a recent low. A bear market is the mirror image, a decline of roughly 20 percent or more from a recent high. These thresholds are conventions popularized by Western technical analysts, not laws of nature, and a single day’s spike or dip does not count. The move has to hold for weeks or months.
Two things matter here for a NEPSE investor. First, these are lagging labels. By the time the index has fallen 20 percent, the bear has been in the room for a while. Second, NEPSE is a small, thinly traded, retail-dominated market with a daily price band (circuit) on the index itself. That makes the index even slower to confirm reality than the S&P 500 would be. So treating the index number as your primary signal is doubly wrong here. Use the definitions to keep score, not to make decisions.
The rest of this piece is about the leading signals, the ones that move before the index does.
Signal 1: Turnover (the one that matters most)
Turnover is the total rupee value of shares traded in a session. You can pull it from the official Nepal Stock Exchange site (nepalstock.com) and from portals like ShareSansar, Merolagani and Nepsealpha, which republish it daily and weekly.
Here is the rule. A rising index on rising turnover is a real bull market. A rising index on falling turnover is a rally running out of fuel. A falling index on heavy turnover is genuine distribution (people getting out in size). A falling index on thin turnover is often just nobody bothering to trade, which can mark a bottom forming rather than a panic.
Why turnover beats price: the index can be dragged up by a handful of heavyweight stocks (think the big commercial banks and a few large hydropower names) while the broad market does nothing. Turnover is harder to fake. When daily turnover in NEPSE expands from the low single-digit billions toward, and stays there for weeks, money is genuinely flowing in. That is your strongest bull confirmation. When turnover dries up and stays dry, the bull is over no matter what one good day on the index suggests.
Watch the trend, not a single day. A useful habit: compare this week’s average daily turnover to the average over the last four to eight weeks. Rising and sustained is bullish. Falling and sustained is bearish.
Signal 2: Market breadth (advancers vs decliners)
Breadth answers a simple question. On a given day, how many stocks went up versus how many went down? You will see this reported as advances, declines, and unchanged and as the number of sub-indices (the 11-plus sectors) closing green versus red.
A healthy bull market is broad. Most stocks and most sectors rise together. A weak or fake bull market is narrow: the index is green but more stocks fell than rose because two or three large-cap names carried the whole number. That divergence (index up, breadth negative) is one of the most reliable warnings that a rally is hollow.
The mirror applies to bottoms. When the index keeps making new lows but fewer and fewer stocks are still falling, selling is exhausting itself. Breadth turning up before the index does is a classic early sign that a bear phase is ending. To read breadth properly at the stock level you need to understand who is actually buying and selling, which is what the floorsheet shows you. Daily advance-decline counts are published by the same data portals listed above.
Run the test like this: on up days, are advancers comfortably beating decliners? On down days, how brutal is the ratio? A market where green days are broad and red days are narrow is bullish. The reverse is bearish.
Signal 3: The index versus its long moving averages
A moving average is just the average closing level of the index over a set number of past days, recalculated each day so it slides forward. It smooths out the daily noise. The two worth watching for trends (not for trading) are the 100-day and the 200-day simple moving averages.
The mechanical reading is unfussy. When the index is trading above a rising 200-day average, the long-term trend is up. When it is below a falling 200-day average, the long-term trend is down. When a shorter average (say the 50-day) crosses above the 200-day, technicians call it a bullish signal; the reverse cross is bearish. You can chart all of this for free on Nepsealpha.
Treat moving averages as a tie-breaker, not a trigger. They confirm what turnover and breadth are already telling you. In a thin market like NEPSE, averages can whipsaw, giving false crosses when volume is low. That is exactly why this signal sits below the first two. If turnover and breadth disagree with the moving average, trust turnover and breadth.
Signal 4: Broker activity and margin loans
NEPSE is a broker-intermediated market, and brokers leave footprints. The data portals publish top brokers by turnover each day, and you can see which broker houses are dominating buying or selling. Concentrated, aggressive buying by a few brokers in specific scrips can flag where institutional or large-investor money is positioning. It is a softer signal than turnover, but it adds color.
The harder version of this signal is margin lending: loans taken against pledged shares to buy more shares. Easy, growing share-pledge credit pours fuel on a bull market because investors can buy with borrowed money. When that credit contracts, the buying power simply disappears. Reporting has put total share-pledge (margin) loans in the system above NPR 156 arba (NPR 1.56 kharba). The level matters less than the direction. Rising share-loan balances support a bull case; falling balances are a bearish drag. This connects directly to liquidity, which is the next and most underrated signal.
Signal 5: Liquidity and the NRB
This is the macro tap. NEPSE is unusually sensitive to liquidity because so much of its buying is credit-financed. When money is cheap and plentiful, it leaks into shares. When the Nepal Rastra Bank tightens, the market loses oxygen.
The cleanest indicator to watch is the interbank rate, the rate at which banks lend to each other overnight. As a rough guide that NEPSE-focused analysts cite, a low interbank rate (in the low single digits) signals easy liquidity and supports a rising market, while a spiking interbank rate (well above that) signals stress and tends to precede corrections. Alongside it, watch the credit-to-deposit (CD) ratio of the banking system: when banks are near the regulatory CD ceiling, they have little room to lend, margin credit tightens, and turnover usually falls.
You do not have to model any of this. Read the NRB’s regular liquidity and rate updates, and read how policy decisions land. We cover the transmission in detail in how NRB monetary policy moves NEPSE and the CD ratio mechanics in our piece on banking ratios: NPL, CD and CAR. The point for the checklist: easing liquidity is a tailwind, tightening liquidity is a headwind, and liquidity usually turns before the index does.
Signal 6: Sentiment extremes (the contrarian check)
The last signal is the only one that works backwards. When everyone you know is opening a demat account, when taxi drivers are giving stock tips, when IPOs are oversubscribed by absurd multiples, and trading groups are euphoric, sentiment is stretched bullish. That is statistically the worst time to be buying with both hands. The reverse extreme, total disgust, when nobody will touch a share and the same trading groups have gone silent, is where bottoms tend to form.
This signal is qualitative and easy to abuse, so use it only at the extremes and only to lean against the first five signals, never to override them. Sentiment confirms a top when turnover and breadth are already weakening under a still-rising index. It confirms a bottom when turnover is dead and breadth has stopped deteriorating. On its own it is just another vibe, which is the thing we are trying to escape.
Putting it together: the weekly checklist
Run these six tests once a week on the same data, and write the answers down. Do not trade off any single line.
- Turnover: is the four-to-eight-week average rising or falling? (Highest weight.)
- Breadth: are up days broad and down days narrow, or the reverse?
- Moving averages: is the index above or below a rising/falling 200-day SMA?
- Broker and margin activity: are share-pledge loans expanding or contracting?
- Liquidity: is the interbank rate easy or tightening, and where is the CD ratio?
- Sentiment: are we at a euphoric or disgusted extreme?
If turnover is rising, breadth is broad, the index sits above a rising long average, margin credit is expanding, and liquidity is easy, you are in a bull market, and a single red day does not change that. If turnover is falling, breadth is negative under a flat or green index, credit is contracting, and the NRB is draining liquidity, you are in a bear market, and a single green day does not change that either. The honest answer, often, is “mixed,” and “mixed” is a perfectly good output. It tells you to size down and wait rather than to bet the house on a feeling.
The verdict
Most Nepali investors will keep calling the market off the index number and their own mood, and most of them will keep buying tops and selling bottoms. You do not have to. The index is a scoreboard, not a signal. Turnover and breadth are the signals, with liquidity and margin credit setting the weather and moving averages keeping score. Sentiment is a contrarian check you use only at the edges.
None of this predicts the future. It diagnoses the present honestly, which is rarer and more useful. A bull or bear call is a checklist output. If your call cannot survive being written down next to these six lines, it was never a call. It was a vibe.
If you are early in your investing, the durable takeaway is unglamorous: trend-following the crowd’s money (turnover and breadth) beats reacting to the index, and a steady alternative like a fixed deposit versus stocks comparison is worth doing before you decide how much to risk in either market.
This is analysis, not financial advice.
