On Tuesday (06), Sri Lankan stocks fell for the first time in six sessions in more than five months. Investors took profits and waited for clues for positive sentiments, according to brokers.
In contrast to the previous 15 days of consecutive foreign buying, Tuesday saw a net outflow of 103.9 million rupees from the market. Positive sentiment over an IMF deal has contributed to a net foreign inflow of 1.74 billion rupees into the bourse so far this year, following a net inflow of 3.24 billion rupees over the previous 15 trading sessions through Monday.
With a drop of 36.06 points, the primary All Share Price Index (ASPI) now stands at 9,330.33.
“The market has been extremely volatile as investors seek more news to keep the market up,” said one market analyst.
While the next budget won’t be due until February. The impact on companies’ bottom lines might become clear in October’s earnings reports. Until then, this degree of uncertainty is to be expected.
Starting on September 1, Sri Lanka will collect 15% of all purchases as VAT.
With a turnover of 4.1 billion rupees, the market saw a significant increase from the daily average of 3.14 billion rupees so far this year.
According to one analyst, investors have been moving away from index-heavy shares and toward counters like Lanka IOC that have seen recent trading activity.
“The market is being driven by herd psychology; traders are dumping inactive stocks in favour of more active ones.”
On Thursday (01), the IMF announced that it had reached a staff-level agreement with Sri Lanka. The potential for a 48-month, $2.9 billion in Extended Fund Facility (EFF) once the debt restructuring is complete.
On August 30th, Sri Lanka presented an interim budget for 2022. This focused on reform and was well received by the market.
A goal of the budget is to increase the tax share of GDP from 8.2 percent at the end of 2021 to 15 percent by 2025.
After declaring sovereign debt default on April 12, which exacerbated the country’s economic and political crises. Sri Lanka is now working to recover. Following its independence, Sri Lanka has experienced a series of economic and fuel crises, but this one is the worst. It is anticipated that the economy will contract by more than 8% this year.
In contrast, the more liquid S&P SL20 index lost 1.07%, or 32.37 points, to close at 2,998.19.
After increasing by 5.3% in July, the primary ASPI index increased by 17.3% in August. In June, it dropped 9.3 percent, in April, it dropped 23.1 percent, and in March, it dropped 14.
Although it was one of the best stock markets in the world with an 80% return the year before. When lots of new currency is being printed, the index has dropped by 23.6% so far this year.
The sharp decline of the rupee this year, from 203 to 370, has also alarmed investors.
The index ended the day down 4.2%, with shares of LOLC trading at 582.7 rupees each.
The share price of Commercial Bank fell by 3.2% to finish at 51.8 rupees. The share price of LOLC Finance fell by 9.4% to finish at 9.6 rupees.