Future scenario of Market

Rajesh Sharma

The market survived through a period of severe crisis. Hope among investors was the most important driver during this critical phase.

Now, the performance of economy and companies may influence the market and some ups and downs could be seen. But the overall environment could be helpful to retain or even enhance positive vibe.

The market has absorbed decreases brought by the book close factor. Bonus factor decreases got diluted and the overall index is shining.

I have some apprehensions too.

1. Commercial banks, development banks and finance companies will be in difficulty to maintain or improve their good performance of previous years due to bad shape of economy/industries/trades/services due to prolonged agitation/blockade. Hence, investors may loose patience resulting to stagnation in the index or even pulling index down.

2. Hydro power companies, particularly with projects in construction phase may face difficulties to complete projects on time which may result in lost opportunities and price escalation. Both, earthquake and agitation/blockade have made their performance affected.

3. Insurance companies' share prices have jumped 4 to 5 times in the last 2 years. This jump is more related to investor sentiment than on the performance of the companies in this sector. Due to probability of increase in paid up capital, the companies in this sector are still maintaining the attraction. However, it would not be possible to maintain the attraction with emotional/subjective factors for a long time. Moreover, if the capital would be increased and if the flood of rights shares would be there, the next year, we will have much less dividend.

4. The micro-finance companies have started to face ethical dilemma. The beneficiaries of MFIs are BFIs/insurance companies as they have invested in MFIs and reaping the bumper harvest due to the gap in margins in interest rates and upward movement of shares prices. Sikhar FPO allotment picture have made the picture of beneficiaries much clear. There is good probability that MFIs have to face regulatory streamlining on one side and not-so-happy clients on the other. This is too early to say something specifically, but there are some signs already that such scenario may influence their performance in coming years.

Hence, the future scenario is complex - improved external environment but challenges at micro level/company level. Therefore, my expectation is that the market will not face storms, and so will not slide significantly down, but will not be on the bed of roses, and so will not gallop. It will move up relatively slowly and gradually facing some downs in between. Such slow upward trend will continue till the start of next dividend season.