Why Investors are swimming naked

"Please god save us from this downhill", it's not only the remark of individual investor at the current scenario of equity market but the tune of mass mental. Fright at the home equity market has kicked its buttress to higher perimeter letting the psychology behind the downhill in company with stock prices.

Everyone at the contemporary phase might be thinking why stock market is going downhill, however the answer diverge on sentiment to sentiments. Some people might view the panic from Top-Down-Approach and others from Bottom-Up-Approach. I mean, there are people with macroeconomic concept throwing grisly words to policy makers, politician at the decision making levels, peace and securities concerns, investment environment or international crisis and frequently the regulatory bodies. On the flipside, we can discover people hanging around with microeconomic concept believing weak fundamentals of company, Short of general investors' awareness as the prime foundation behind the plain sailing stock market.

The prolonged slump at stock market has been one of the most serious points of worry for people and to government as well, as millions of money flow regularly from the market to the revenue account of government. The peak and trough are the natural phenomenon of stock market which sways on the weight of news around.

Discovering the genuine truth of market peak and retreating is hard-hitting effort as is decided by the crowd psychology; however there is noticeable evidence behind the scenes. At present, many investors at the secondary market are swimming naked along with falling prices but they are yet unknown with the fact that why market is running out of hope. I have endeavor with certain grounds to seek out the cause of blood in the street.

The key behind the drought of stock market is investors' psychology, someone had truly said that "Psychology is the most essential factor at stock market and one which is least understood". And these days' investors' psychology has been haunted by fear of promoters share floating in the market as per the Sebon provision. Sebon had provided the consent to convert promoters' shares so as to maintain ratio of 49 percent public holding and 51 percent promoter's power. This shed alarm to panic as the shares will be induced in market by more than 50 percent as recently many companies have the power ratio at 70:30.

This is the time of shares listing in the Nepal Stock Exchange, especially right shares and bonus shares which were previously declared & distributed and others listing are in pipe line. Consequently, most of the people have titanic amount of certificate in hands and fancy to in cash that paper certificate so simple formula exist "If supply exceeds, price slid down" and same phenomenon has preoccupy our market. Moreover, the government provision declared at the budget speech to have Pan Number for more than 1 million trade supported by disclosure of source of fund for trade exceeding 2 million has impede the cash flow in the stock market.

In addition, the hinder to acquire the loan for shares from financial institutions slowed down the demand of scrip as NRB's decisions prohibits for easy loan access. Similarly, the interest for the loan is high from 10 to 15 percent and definitely interest rate exceeds the return rate. So people are being on sideline to keep away themselves from the tag of "hoodwink" on taking loan on high interest and less return in stock market amid high risk.

It is obvious that our political and economical aspect is in transition phase, and capital market is just one of the economic parts affected by political events. For this reason, the political discrepancies along with ruined economy, our stock market is yet to steps forward in speed. Once, if political and economical environment is stabilized than sure there will be bulls around the street chasing the bears out of town. Not only political or economical events affect the market, it is also sensitive to socio-cultural environment. The divine festival of Nepali people will kick off within weeks and obviously people wants money, so selling share certificate collection of money has took the central stage.

Most possibly these are the primary facts surrounded the stock market, and there are too hidden facts as un-ethical trade by some players for their vested interest, either by some means impact of international crisis. These grim outlooks have hammered the market health amid the sound profit cards of companies and dividend declaration by many of them. But investors are less attracted with the positive points and following the herd in the market with throwing selling orders.

Stock markets ebb and flow. As share prices responds to bull tidal, investors' exuberance surges for a time then surely recedes. Low tides will not leave investors exposed to capital losses, it is the high tide that let stock market wealth wash out to sea and then do we discover which investors have been swimming naked? And now it's time for us to discover that "Are we really swimming naked" at a time where bearish crawl has feared us for long time. If yes, then there should be defined ways to wrap up our wealth.
Source:Bikash Chaudhary (nepalsharemarket.com)