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SHARE MARKET FLUCTUATIONS & EFFECT

The following are some of the effects on investment culture of investors, reliability of corporate information, safety of investment and over all effect of investing community in the long run.

  1. Fluctuations: Recent abnormal growth in share prices and followed by steep fall in the prices resulted into treating the investment in capital market in the form of shares as a game of gambling instead of the culture of investment since there is no relation between the price quoted and income earned, net asset value, return on capital of the company.
  2. Information: The information available to the shareholders prospective investors is not up to the required level for which he has to depend on advises, rumors, etc. developed in the capital market. The required information to the prospective investor is with regarding the performance of the company, net asset value of the company, return on capital of the company which are not available on Media regularly. Hence he has to depend on somebody’s advise and rumors.
  3. Caution: All the information available through Media to the investor is on going concern concept but not as a safety alarm source. The Media and other information source are propagating information obtained during the period of downfall or uptrend which is a concept of going concern. There should be a system to caution the investor about the prospective fall and safety levels of share prices. The system can be based on the price earning ratio level, return of capital level, net asset value level which is an indicator of the past performance of the company.
  4. Speculation: At present the market is guided and goaded by speculation attitude by many unwanted driving forces. Since there is no relation between the performance of the company, the safety of the investment may depend more on rumors and speculations which resulted into high price and steep fall for shares of low performing and low intrinsic value of particular share. So it is advisable to mention and caution about the price earning level/Net asset value/Returns capital after which investment can be treated as a speculation.
  5. Infrastructure (Roads, Water Projects, Industrial Parks, Economic Zones, Ports, Trasportation etc. which help in promoting Industries): Entire Industrial land infrastructure development mainly depends upon the investment culture of the investors made investment in the form of shares, debentures, units and mutual funds in terms of investment for long term investment in infrastructure requirements of the Nation for fairly long period. If the confidence of the investors is lost on the investment made in shares, debentures, units, bonds etc. they will keep away from the investment attitude and they will go for unproductive investment like Gold, Jewelers, Real Estates and they will spend unnecessarily.

So it is a time to concentrate on converting the savings of the citizen into the investment for long term requirements of the nations in the form of Industrial infrastructure, projects requirement for long term period. The investment in shares of the companies which are having bright prospect with high intrinsic value added with perfect knowledge, planning and performance and yielding good results, though they are lagging behind in the publicity. The entire criteria should be the safety, income, continuity of the investment made by the investors. If the individual investors are out of the investment culture the corporates, mutual funds invested in the capital market may not be advisable since again investor may try to withdraw their investment when they lose confidence on the mutual funds or capital market at that time the mutual funds may not be able to fulfill the repayment requirement to the individual investors. Ultimately it is a confidence of the individual investors which is utmost important factor rather than speculation, rumors, unvisitable projections without depending upon the actual performance of a particular company.

If the investment culture is not in the minds of individuals the mutual funds, corporates may not have sufficient funds to meet the requirements of the infrastructure and investment required for fairly long period projections. Ultimately the individual  investor who is to subscribe to the shares, units, bonds issued by any company mutual funds or in financial institution, for which the ultimate requirement is confidence of the individual investor otherwise which will dismantle the entire investment culture from anywhere of the Globe.

The above said are our personal opinions only.

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