Stock Market

Stock market plays an important role in the economy. It provides capital to the organization while investment opportunity to the mass population. It enables firm grabbing opportunities from different angle such as portfolio diversification, business expansion.

Stock market is a virtual marketplace where pricing can not be controlled and/or defined with any rationale. Theory can rarely be applied in the practical field of stock pricing in the secondary market. Investors create demand, cause imbalance to supply and results price hike. Besides demand supply equation, the market is mostly dominated by the perception of the traders, rule-regulation regarding investment, knowledge level of traders etc. Recently, Dhaka Stock Exchange has experienced an unusual price hike and collapsed as well. Many traders have lost their capital while few have gained unlimited.

Ideally investments need collection of relative information and analysis to forecast future price. But few institutions use to analyze data, trends etc. Personal investments are mostly done with their intuition, suggestion, rumor etc. Thus this effortless, easy gained profit attracts individuals which causes

    1. Additional flow of money in the market resulting higher demand

    2. Increase cost in different market as a result of competitive profit ratio

    3. Demoralizes SME due to high opportunity costs

There is no limit of price hike, profit ratio as well. It may be considered as an opportunity cost in regular business by the investors. Adjusting with that opportunity cost, which is a common nature of business organization, is to increase their profit up to that mark and the easiest way to do so is increased price.

On the other hand, these easy gained profits lead to additional expenditure in daily life. As a result, life becomes more expensive. Immediate effects include urban resident, transport, foods, fashion etc. The worst effect is being luxurious in every aspect of daily life which is very much incompatible for the limited earned people like service holders.

Moreover, almost effortless gain prevents the development of new enterprise which needs much more effort with low return associating high risk. Even many people sold their business and invested the capital in the stock market which is very much alarming for the economy.

Stock market doesn’t contribute to the GDP directly but it is has direct impact on the different critical segment of the economy like market demand, employment etc. Thus it’s considered as the mirror of the economy. So it needs to be handled very carefully. As a long term market place its need to be stable and much more controlled regularly for the sake of general investor and the economy as well.