After an up and down session, stocks ended near the flat line on Tuesday as the main index of the Tehran Stock Exchange (TEDPIX) inched up 6.1 points or 0.01 percent to 71,408.4.
The stock market seems to be in a slumping position as it has been experiencing a downward trend since winter. Last Saturday, the TSE had its worst day in a month.
According to the TSE website, at Tuesday’s close, the equity market’s benchmark was in green as most of the indices were in green territory as well. The first market index was up 10.3 points or 0.02 percent to 52,414.7. The free floating index gained 12.2 points or 0.02 percent to 80,218.2. The industry index rose 34.5 points or 0.06 percent to 60,528, and the blue chip index added 4.2 points or 0.13 percent to help the TSE’s benchmark to stay in green territory.
As on Monday, the second market index was named the market laggard as it slipped 24.1 points or 0.02 percent to finish a fresh negative trading day at 141,667.9 keeping the unsettling investors worried about the upcoming trading days.
In a mixed trading day, 455,200,583 shares changed hands valued at 1.81 trillion rials. Trading volume on Tuesday indicated an 85 percent increase compared to Monday.
The market’s benchmark has had a dismal performance in the past few months, contrary to its historic record in 2013. So what is behind the series of consecutive losses in the equity market?
Market Fluctuations
Although a variety of factors seems to be contributing to the market sentiment’s instability, those named the market stressors include banking interest rates, international sanctions, lack of transparency in the firms’ financial reports, value added tax on industries, as well as corporate tax. But the situation has been more or less the same since last year, so what has caused the TSE’s record high and what has caused a drastic shift in the market’s upward trend?
Iran was under severe sanctions when the stocks in the TSE surged around 130 percent, posting the highest increase among all sectors. Iran is still suffering from the western sanctions -- though they have been slightly eased as a result of an interim nuclear deal signed last November, while the TSE’s benchmark has shifted to the red.
Market analysts believe that TSE’s upward march couldn’t be the only indicator of the capital market prosperity. The TEDPIX shouldn’t be the only gauge of assessing the market as there might be some giant companies that influence the market trend and are able to push the TEDPIX up and down. On the other hand, there are hundreds of listed companies that may leave a small impact on the TEDPIX, and their fluctuations may not be tracked by ordinary investors.
As an example, the Civil Pension Fund Investment Company pushed the TEDPIX into the green by 25 percent on Tuesday, proving that the TEDPIX couldn’t be the only indicator for investors in the equity market to conclude about the market’s outlook.
Investors and portfolio managers should bear in mind that the equity market in Iran is unlike the leading stock markets in other countries as here a few giant companies can change the market’s trend.
The stagflation of major industries which is the legacy of western sanctions as well as a currency collapse in Iran, had the industries grapple with the cash-flow issue. Besides, banks are struggling with their overdue loans, something that has strictly limited their financial resources.
Given this situation, the appetite for risk is narrowing as the downward trend affects the investors. But as the national economy is getting back on track and the negative economic growth has been halted, there is a variety of listed companies in the stock market that are stellar but they don’t weigh a lot on the TEDPIX.
Great opportunities lie in Tehran’s equity market and individual investors should watch the companies’ changes precisely and stay far from market speculators.
The stocks have been undervalued creating the best occasion ever for investors to shore up the efficiency of their portfolios, while observing diversification.
The bottom line is that, shaky traders are reluctant to invest in small firms in the equity market and don’t heed and track their growth even when the market is in red.
