NEPSE, Elections Connection: Will the market turn bullish?

With elections approaching, one question always returns in Nepal’s investment circles: Will elections push the market up?

The simple answer: Sometimes yes—but not always. Elections can lift sentiments, but NEPSE doesn’t move on politics alone. Most of the time, the real driver is liquidity (money in the system) and interest rates.

Let’s keep it practical.

What history generally shows

If you look back at Nepal’s past big election phases, parliamentary/CA election periods have often seen a positive bias—meaning investors get more confident, buying increases, and the market tends to “wake up.”

But it’s not a guarantee. We have also seen election cycles where the market didn’t perform well because the financial environment was tight—especially when liquidity was squeezed, and rates were high.

So, the pattern is:

✅ Elections can help sentiments
❌ But liquidity decides whether the rally survives

How do elections impact NEPSE?

Elections affect the market mainly through expectations, not instant fundamentals.

1) Uncertainty reduces
Before elections, investors hesitate: “Policy change? instability? unclear direction?”
As the timeline becomes clearer, some of that fear reduces—so buyers come back.

2) “Hope trade” starts
Investors begin cashing in on things like:
• stability
• better business confidence
• policy continuity
• development spending

Even if none of this is confirmed yet, markets often move on hope first, reality later.

The big truth: Liquidity beats politics

This is the most important point:

Elections influence mood. Liquidity controls the trend.

Even if the election story is positive, NEPSE struggles when:
• banks are tight on liquidity
• interest rates are high
• credit flow is slow
• people prefer fixed deposits over shares

In that situation, election optimism may create only a short spike, followed by profit booking.

So is election time “good” or “bad” for NEPSE?

Think of election season like this:

High-opportunity + high-volatility period

Market becomes positive only when:
• political transition looks orderly
• investors sentiment stability
• liquidity improves or rates cool down
• NEPSE starts forming higher lows (better structure)
Market becomes negative when:
• instability looms
• liquidity stays tight, and rates stay attractive in deposits
• NEPSE keeps breaking supports and fails to recover
Meaning: elections can act like a catalyst, but only if the market has “fuel.”

What to expect this time (near-term view)

As elections near, the most realistic expectation is:
1) Volatility increases
Headlines, rumors, and sudden sentiment shifts can move prices faster than normal—especially in mid/small caps.
2) Quick rallies are possible
Even small positive signals can trigger a sharp “risk-on” move.
3) Post-election phase matters most
After results, the market usually stops focusing on “who won” and shifts to:
• economic direction
• budget tone
• capital market and banking policy signals
• liquidity conditions
That’s when the real trend forms.

A simple investor playbook (casual, but effective)
Before election (rumour zone)
• Don’t chase vertical candles
• Trade a smaller size
• Prefer liquid stocks
• Buy near support / clean breakout with volume
Election week (event volatility)
• Expect fake moves
• Keep stop-loss strict
• Don’t average down emotionally
After election (reality phase)
• Watch policy tone + liquidity
• Add only if NEPSE holds higher lows and structure improves

Conclusion
Election season does not automatically lead to a bullish market. It is a period where sentiment gets louder—but liquidity still decides the direction.
If liquidity improves, elections can become a strong catalyst.
If liquidity stays tight, election rallies can turn into short-lived spikes.
So, trade the structure, respect liquidity, and treat election headlines as volatility—not certainty.

By Kriti Jha

Jha is an investor and the founder of Prime Trust Investments, a finance-focused platform that simplifies Nepal’s economy, banking, market developments, and company analysis for general audiences. She writes data-backed, practical explainers that connect macro headlines with everyday financial realities.