Stock market declines, an investment opportunity

Hiran H. Senewiratne

STOCK MARKET: During the last three days the Stock Market reported a sharp drop by 200 points. However it would enable more investors to invest in the market to reap benefits sources said.

Given the inflation rate in the country it is better to invest in the stock market rather than other deposits in banks and financial institutes.

According to Director Surveillance and Research Security Exchange Commission, Chandu Epitawala, the stock market is fluctuating but it will stabilize at some point in time.

He said that when the market is down it is always an opportunity for investors to invest in the stock market in a big way. Further, all markets will recover at a point and come back to normal.

Investing in shares of listed companies is an attractive avenue of investment, which will offer a hedge against possible loss from inflation.

Investment in listed company shares is simple. This could be done either through the primary market or the secondary market i.e. .the initial public offering of a company or by trading in the secondary market on the Colombo Stock Exchange.

Shareholders receive a claim on dividends and earnings when approved by the shareholders.

Epitawela also said that investors should look at long-term returns in the equity market by ignoring the volatilities of the market.

The shareholders will also have the opportunity to participate in and benefit from Rights Issues, where additional shares could be bought in proportion to what you hold at discounted prices, and also benefit from Bonus Issues, meaning the distribution of free shares (again in proportion to the numbers already held) with the prospect of increased dividend earnings.

Barleet Mallory Stockbrokers (Pvt) Limited, Business Development Manager, Angelo Ranasinghe said that the market is resilient to fluctuations which needs big investors to be active to evade short term downturns.

He said that it is better to invest in stocks when the country’s inflation level in very high.

Shares in listed companies in an active share market are liquid and marketable assets.

They can be turned into cash quickly without major price changes.

The investor in shares does not need to wait long periods to trade in shares held. The shares could be held until dividends are paid.

They could be sold at a premium on the Stock Exchange and thus, a profit can be realised.

The profits realised are often above the prevailing rate of inflation.