Research · NEPSE ALERT
Do NEPSE’s Sectors Move Together? Banks, Hydro and the Rest
When banks rise, what does hydro do? Which sector goes its own way? Which has already run far ahead of NEPSE?
Written 12 October 2026 (26 Asoj 2083 B.S.) · numbers update daily
By Ananta Dhungana · Banking vs Hydro: 2011-03-20 to 2026-10-16 (3,557 trading days) · all sub-indices: from 2000 (1368 weeks)
You hear it every week: "banks are up, hydro is next", "money is rotating out of banks into hydro". Does it actually work like that? We took the daily closes of every NEPSE sub-index and checked which sectors move together, whether one leads another, and which sector has already run far ahead of NEPSE.
Correlation is one number for how closely two things move: 1 = always together, 0 = no link, −1 = always opposite.
Banks and hydro: they move together, but neither leads
Banking and Hydropower have a correlation of 0.61 on daily moves, 0.61 weekly and 0.64 monthly — they usually move together. Over the last 12 months it is 0.73, tighter still.
In the 381 weeks banks rose, hydro rose too in 72% of them (average +2.36%). In weeks banks fell, hydro rose in only 23 of every 100 such weeks. But the key result: the week after banks rose, hydro rose 51% of the time — the same as any week (47%). A coin-flip.
Shifting one series by one to four weeks never pushes the link above 0.07. "Banks first, hydro next" does not show up in the data — both move in the same week, on the same market mood.
On the 271 days banks jumped 2% or more, hydro rose the same day 85% of the time, but its median over the next 5 days was just +0.02% — chasing it does not pay. The other way round, after the 159 days banks fell 2% or more, hydro's 20-day median was +1.87% (up 57% of the time) — after a big drop, hydro usually bounces.
| Year | Banking | Hydropower | Correlation |
|---|---|---|---|
| 2026 | +16.6% | +8.2% | 0.77 |
| 2025 | −5.5% | −5.8% | 0.58 |
| 2024 | +19.8% | +46.4% | 0.73 |
| 2023 | −12.7% | +5.9% | 0.64 |
| 2022 | −19.8% | −18.2% | 0.78 |
| 2021 | +7.4% | +74.1% | 0.50 |
| 2020 | +51.9% | +69.0% | 0.45 |
| 2019 | −0.4% |
The amber rows are the years they split: 2014 (banks −1%, hydro +24%), 2015 (banks +33%, hydro −13%), 2016 (banks +31%, hydro −11%), 2017 (banks −12%, hydro +12%), 2023 (banks −13%, hydro +6%). Mostly together — but some years one sector runs on its own story: new projects or floods for hydro, interest rates and liquidity for banks.
Every sub-index against every other
Below: how closely each sector’s weekly moves match every other’s. Dark blue = together, white = no link.
All years
| NEPSE | Bank | Dev Bank | Finance | Hotel | Hydro | Invest | Life | Mfg | Micro | Non-life | Others | Trading | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| NEPSE | 0.92 | 0.75 | 0.63 | 0.50 | 0.77 | 0.90 | 0.86 | 0.55 | 0.82 | 0.83 | 0.71 | 0.15 | |
| Bank | 0.92 | 0.62 |
Last 12 months
| NEPSE | Bank | Dev Bank | Finance | Hotel | Hydro | Invest | Life | Mfg | Micro | Non-life | Others | Trading | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| NEPSE | 0.92 | 0.89 | 0.70 | 0.77 | 0.90 | 0.95 | 0.89 | 0.65 | 0.95 | 0.82 | 0.82 | 0.55 | |
| Bank | 0.92 | 0.81 |
Closest to NEPSE: Banking (0.92) and Investment (0.90) — they more or less are the market. Going its own way most: Trading (average 0.25), then Hotels & Tourism (0.43) and Manufacturing (0.45).
The average link between sectors is 0.54 over all years, but 0.65 in the last 12 months. Right now everything moves together — up together, down together. In a market like this, reading the overall direction matters more than picking the "right sector".
All 78 pairs, side by side
- Most together: NEPSE–Banking (0.92), NEPSE–Investment (0.90), Life Insurance–Non-Life Insurance (0.86).
- Least together: Hotels & Tourism–Trading (0.06), Hydropower–Trading (0.07), Banking–Trading (0.11).
- Only 15 pairs where one sector moves a week before the other: NEPSE → Life Insurance, Microfinance → NEPSE, Non-Life Insurance → NEPSE, Trading → NEPSE, Microfinance → Banking, Non-Life Insurance → Banking, Trading → Banking, Manufacturing → Life Insurance, Microfinance → Life Insurance, Non-Life Insurance → Life Insurance, Non-Life Insurance → Manufacturing, Trading → Manufacturing, Microfinance → Non-Life Insurance, Trading → Non-Life Insurance, Trading → Others. Every other pair moves in the same week.
- Moved closest together in the last 12 months: Hydropower–Trading (0.07 → 0.59), NEPSE–Trading (0.15 → 0.56), Hotels & Tourism–Manufacturing (0.33 → 0.72).
| Pair | All years | Last 12 months | Moves first? |
|---|---|---|---|
| NEPSE · Banking | 0.92 | 0.91 | no — same week |
| NEPSE · Investment | 0.90 | 0.95 | no — same week |
| Life Insurance · Non-Life Insurance | 0.86 | 0.82 | Non-Life Insurance |
| NEPSE · Life Insurance | 0.83 | 0.89 | NEPSE |
| NEPSE · Non-Life Insurance | 0.83 | 0.82 | Non-Life Insurance |
| NEPSE · Microfinance | 0.82 |
To see how every other sector reacts when one sector moves, open Seasonality → Index vs index.
Against NEPSE: which sector has already run ahead?
We divided each sector index by NEPSE and checked where today’s ratio sits in its 5-year range. 100% = the most it has beaten NEPSE in 5 years (already ran a lot), 0% = its weakest (cheap against the market).
Near the top: Manufacturing (91%), Hotels & Tourism (83%). They have already outrun NEPSE — less room left to keep outrunning it.
Near the bottom: Finance (19%), Others (13%), Life Insurance (9%), Non-Life Insurance (1%), Microfinance (0%). Cheap against the market — but cheap can stay cheap; the signal only counts once they start turning up.
How we use it: in the Sector Rotation forecast
We have added this to the Sector Rotation forecast in Broker's Ground: above 90% of its 5-year range against NEPSE costs a sector 1 point, above 80% costs 0.5, and below 20% while turning up adds 1 point. The forecast's track record is replayed using only the data available each week. To compare any two sectors yourself, open Seasonality → Index vs index.
Source: daily closes of the NEPSE sub-indices (our index history); weekly moves from each week’s last trading day. Every number on this page updates itself daily.