More

    Why is the market declining, what is the main reason for the market to decline?

    Kathmandu | All analysts and investors have their own opinions. Fluctuating share market price is its principle. As we have been studying economics, there is no satisfactory answer as to why and how the share price fluctuated. Pricing is done according to the principle of supply and demand. Similarly, demand and supply in the stock market fluctuate according to the rules.

    Every day, we hear online, radio, television, various newspapers, directly or indirectly, reading the news of the stock market through various means of communication and technology. We have been hearing that the market has increased by so many points today, it has decreased by so many points ।

    Share price is not to be determined or fixed by any one person, any group or the officials of the company concerned. In this way, there is no question that any law should be made with the same value by making rules and regulations. The market itself determines the price. Thus, according to the demand of economics and the principle of supply, the demand for the goods we consume has been increasing. But as supply decreases, prices rise.

    The change in interest rates of banks and financial institutions plays an important role in the fluctuation of share market price. When the bank interest rate goes up, the share price starts going down. Investors are more attracted to interest on bank savings than investing in stocks. When interest rates fall, share prices rise. Better a poor horse than no horse at all.

    Similarly, if the demand decreases but the supply increases, the price decreases. Similarly, the number of investors buying shares of a company has been increasing in the stock market. But if sales are low, the company’s share price is likely to rise. Another condition is that if you sell more and buy less, the price goes down.

    Sometimes this happens in the stock market. When buying companies that are not in high demand, the seller is forced to sell even after reducing the price due to lack of buyers. As a result, there is an imbalance between the share buying and selling transactions that take place every day, every time, and the share price fluctuates.

    Another important thing to keep in mind is that companies with the potential to be more profitable in the future, financially based, Companies that have been able to secure their investments as their financial statements have been strengthened have been able to reduce their bad debts and increase their earnings per share. Even when the country’s economy fluctuates, the demand per share increases and the supply decreases. Which also increases the price.

    Similarly, in the opposite case, if the situation of declining prices is reversed, the non-profit report will show a decrease in profits and bad debts will increase. The company’s weak management, declining earnings per share, declining bonus and cash dividends, When the economic indicators of the economy weaken, the direct effect is that the company loses and the company has to close down, which reduces the demand for shares of the company. The share price of that company is likely to decrease by the same amount. The number of investors who want to invest in such a company is low.

    It takes a long time to sell the shares as the demand decreases. It takes a long time to sell when you want It is also impossible to take a loan from various financial institutions with collateral.

    Similarly, another important factor that can make a company’s share price fluctuate is its future plans. Although the company has made lower profits this year, the areas in which the company has invested in the future are likely to be more profitable than in the past. And, shareholders are more likely to receive good bonuses and cash dividends ।

    Another important point is that companies that have made good progress in the past will not be able to deliver the same returns in the future To give such an example, about 7 years ago, the price per share of Standard Chartered Bank was Rs 8,000 to Rs 9,000 and the earnings per share was Rs 70. At present, the share price of that bank is around 400. Earnings per share have declined. Profit growth is not so good. Trade is shrinking. As a result, investors’ demand for the company’s shares has not increased. Shows a decline in prices.

    Similarly, the reason behind the fluctuation in the share price is due to the actions taken by the officials involved in the management of the company, the rules and regulations, and the issues that may arise against the company from time to time. Activities such as employee strike warnings negatively impact the company’s future, as demand for shares declines and the number of sellers increases, leading to declining prices.

    Positive and negative news about the stock market, which transmits the news from time to time on the other factors that cause fluctuations in the share price, also causes fluctuations in the share price.

    Other factors affecting the share price include profit and loss of the company, dividends distributed by the company, political changes, employment situation in the country, economy, future strategic objective of the company, legal changes,

    Another factor is the change in interest rates of banks and financial institutions. When the bank interest rate goes up, the share price starts going down. Investors are more attracted to interest on bank savings than investing in stocks. When the interest rate goes down, the share price goes up. Better a poor horse than no horse at all.

    Another important factor in the fluctuation of share market price is monetary policy. Monetary policy is issued by the National Bank. Every agriculture while maintaining the bank and financial institution to make the economy of the whole country strong and transparent In addition, criteria are set for investing in industrial hydropower and other sectors.

    Due to that, the share price has a direct effect on fluctuations. Just like in 2072 BS, NRB in its monetary policy asked every bank and financial institution to increase its paid up capital by giving time period. All banks and financial institutions increased their capital through bonuses, rights shares, and merger acquisitions. Nepal’s stock market made a history when the same capital increase came in monetary policy. All the companies have increased their share price. Directly and indirectly, the monetary policy of the country also reduces the share market price.

    Other factors influencing the share price include profit and loss of the company, dividends distributed by the company, political change, employment situation in the country, economy, The future strategy of the company is influenced by the objective plan, legal changes, the operator of the company and the intention etc.

    Political instability, liquidity crunch, limited access to easy credit and protracted sanctions Amidst the high risk of shrinking the revenue of a listed company, it is unlikely to be sustainable.

    Why is the market behavior different?
    As the epidemic spreads, the demand for loans for investment in other sectors will decrease, so most investors will return to the stock market. And why can’t market predictions come true? Because they only look at past trends.
    However, the market does not always show the same trend. If the same trend was shown, the market would be risk-free and investors would be guaranteed a return on their investment. This time too, the market has shown a different trend. Last year, investors were fed up with the then finance minister’s intolerant attitude towards the market. And, when it comes to the resignation of the finance minister, the market has shown a tendency to go up and down again after his tenure is extended.
    The market had fallen to a record low last year. And, the declining market was expected to rise. The liquidity situation was very comfortable. Banks and financial institutions had ample limits for share loans. Politics did not become unstable. Now there is another change in all these. And, investors need to understand that.

    Comment Down:

    LEAVE A REPLY

    Please enter your comment!
    Please enter your name here

    Related

    Last update

    MUST READ