Insurance & Micro Finance may lead when the short or prolonged bear market starts in Nepal Stock Exchange

During the last prolonged bear phase, commercial banks lead the burst of the bubble. This time sooner or later when the short or prolonged bear market starts, the insurance sector and the micro finance may lead the burst of the bubble. Without any significant addition of muscle in the body of the companies in these two sectors, they are gaining the size of King Kong. One fine morning, they could be diagnosed as edema.

If there appears some liquidity crisis for comparatively a longer period and BFIs start selling their holdings in large scale, the market may react sharply negatively. Similarly, the dividend they may offer if decreases significantly, the bubble in these sectors may start bursting. This is possible as they have an increased market price and also increased paid up capital due to bonus shares and rights shares. If they fail to maintain their growth in proportion to their increased size, it is almost certain that this situation would come.

Hence, my advice to friends is that please see these stocks as trading stocks not as investment stock. This may provide you both – profit and safety.

Rest, you are wise to decide.

Source - Rajesh Sharma