Featured, Market Watch

Gaijatre Index & Its Anatomy: Supply & Demand

Published by Octron on August 12, 2009

This is a guest article send to us by Mr. Rajesh Sharma (rajeshs_09 [at] hotmail.com). If you too are interested in sharing your article please mail to us at editor@nepseguide.com. We would be glad to share with our readers.

This is the final part (out of three part article) of an analysis regarding recent downfall of NEPSE index despite harvesting season (in the stock market). If you missed earlier parts click the links below to read;

Gaijatre Index & Its Anatomy: Political Instability

Gaijatre Index & Its Anatomy: Social Doldrums Psychology

After talking about socio-political factors lets get back to the basics; Supply & Demand. The recent market draught can also be justified by various technical factors apart from the previously mentioned political, psychological & social factors.

Realty Market Open for NRN: Government is drafting policy so that NRN would be able to buy land and houses in Nepal in their name officially. Poor Mama & Papa, who were enjoying the privilege of Nationality Certificate might have to hand over the property to their respective heirs soon. They had bought the property from the remittance money sent by their son, daughter, brother or sister. When people can buy tangible and profitable assets like Land and House (which is in good supply & demand), why concern with Stocks; Which always fluctuates, and you need to have good knowledge before jumping into this bulls & bears market
IPO Refund lost in thin air: The uncertainty of government, prevailing security issues, once again dissolves huge chunk of cash into some toilet tank or some bank locker. Big investors, Black marketers, people who have exempted tax illegally have once again drowned their money which they got back from IPOs. Why would they take chance with this Hit & Miss Government by playing in the secondary market? You may never know what kind of policy is being drafted by this UNSTABLE government. This is one of the major factor why we are not seeing any demand in the secondary market despite huge supply of cash from IPO refunds.
Sweet Sixteen: Fresh batch of shares are like teen spirit for the investors. They are fresh, new and readily available at your cost (Erotica intended!). Look the trading volume of BOAN & Citizen, they are most favored ones by the new and old fat players too. So, when you know within few months you can lay your hands upon these fresh shares (Sunrise, Vibor, Prime, Crystal, Madhyamanchal, Arun, PDB), why bother with OLD used and throw ones.
Global Recession & Remittance: The recent global recession and layoffs have drastically decreased the inward remittance in the country. As Nepal doesn’t have any export product which could take even 1% of the global market, the recent lay off of workers from Middle East have hit very bad in regular inflow of the cash in the country. Despite having reasonable price quotes for shares, due to lack of buying power, sellers are returning empty hand.
From realty market to share market, the sellers are outnumbering the buyers. As we are importing everything from salt to Pringles, Needle to Cars, we are slowly depleting the reserve fund which we have. If the cash inflow continues to slow down, while outflow increasing day by day, then the market might never get of the bearish trend for very long time.
Dear Market & Bearish Stock: Nepal is facing one of the tough times in the economic market, every quarter inflation rate of daily commodities reaches above 14%. The commodity market has become so dear, lower middle class and lower class people are having difficulty even meeting their daily needs with current earning. How can they invest anywhere when all their monthly income is spend to get two meals a day?
So, Dearest commodity market is hindering lower middle class & even middle class to save for their living instead of investment.

Apart from afore mentioned points there are many other factors which directly or indirectly affect the market. NRB monetary policy, NEPSE chief resignation, NRB governor kick out and reinstating of old NRB Governor could be some of them. The reasons for recent downfall well is very deep, we can go on digging it out but it wont get empty.

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