In this Bull Market, protect ourselves from the cartels' fishing net. - Expert Opinion

This is a real bull market. But, within this bull market, certainly there is influence of cartels. Among these cartels, the major two are – New Investor's Forum (an informal tie up of two major investors) and some big brokers coming together and doubling as speculators. We could see some of the companies with problem are at seventh heaven, such as KIST. The bank is in loss, it had and has major governance problem, it is surrounded with scandals and frauds, etc. But, its share price is sky rocketing and the volume of transaction is unbelievably high. Strange!

This cartel factor may affect the market in immediate future. The price of select companies may go down sharply. Because of the preference of cartels of small and medium cap companies, the high price companies are less affected and may be, if price goes down, they could stand a bit firm. The small companies, may be, they are great now, but are vulnerable. The targets now are the mutual funds and the insurance companies for the cartels to sell the shares they have bought. They will spread rumor of merger with a reputed bank by utilizing the services of a few media houses/journalists and most probably, will sell KIST shares at inflated/manipulated price primarily to Mutual Funds and insurance companies by paying under-the-table pocket premiums. The investment managers in MFs and insurance companies will buy shares of companies like KIST and may become millionaires and one fine morning, when the market would go down for KIST, they simply will blame KIST. As a result, the investors will loose confidence and the companies that have invested in would suffer immensely.

The sponsored buying and selling is a new phenomenon in Nepali market and we, small investors, should protect ourselves. And, the best defense is to go by the financial health of the company rather than by euphoria and super greed.

Hence, during this bull, we have to be extra careful while making investment decisions. We should welcome this real bull and also protect ourselves from the cartels' fishing net.
-Rajesh Sharma