Oct Fri 2024 01:36:03
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Kathmandu. Some argue that the stock market is risky. In reality, the stock market is more risky than beautiful. Risk is the main subject to be understood and explained in the stock market. But the stock market experts and experts rarely talk about it. Of course, the public is rarely informed about the risks. In addition to assessing the risk in the capital market, it can also be a deception to say that the stock market is beautiful to the general public. Because the stock market can't do much if it always goes up. In particular, the overall NEPSE index will increase after the company's share price increases. The value of the company can increase in two ways.
The first is the business growth of the company. In other words, the return on equity is an increase. When the company's return increases, then the company's share price also increases. The second reason for the increase in the market is that the interest rate is cheap and the monetary policy of the government is becoming flexible. The interest rate in the market of Nepal is only cheap so the market does not grow. The government's policy should also be easy to increase the demand for money in the market. The policy taken by the National Bank influences the demand for loans. As credit increases in the stock market, the market also increases. 2 elements work in this too.
After the increase in share loan, the share becomes locked. As a result, there will be a decrease in the supply of shares in the market. On the one hand, the demand for shares increases and on the other hand, as the number of shares decreases, the price of shares also increases in the market. Because of this, the market becomes bullish. In such a situation, the interest of the money in the bank is less. Because of this, investors start investing in the stock market seeing higher returns.
As investment increases, the demand for shares increases. Such a cycle does not last forever. When the share price increases by two or three times, the interest rate also starts reaching double digits. People start withdrawing money from the market by selling shares again. After they start getting more interest in bank term deposits than in stock market, the supply in the market increases. Because of this, the market starts moving again in bearish mode. Which is not easy for many new investors to find.
Therefore, the cycle of new entry and exit of old ones is always going on in the stock market. For this reason, the stock market is beautiful for those who can sell the shares in time. For those who cannot sell shares, the stock market is always risky.