“It’s a natural correction that is taking place that is healthy for the market” he told News360.lk.
Jafferjee who is the Managing Director of the JB Securities added that the ongoing market correction has resulted in some of the stocks which peaked in October 2010 going down by 30% to 40%.
He believes that the investors haven’t noticed this decline owing to the way the market index is being calculated since the index is heavily weighted towards large market cap stocks.
Describing what investors should do at a time like this Jafferjee said, “You have to be selective in what you buy, it is at times like this where good research and doing your homework comes in handy. In a go – go market like we had, success did not require much effort!”.
He advises investors not to buy shares that are primarily driven by momentum since they can be victims of pump and dump market manipulators.
Jafferjee stopped short of timing a rebound but stated that when a market goes into a steep dive it normally rebounds but it remains to be seen whether the upward rally will have legs.
Talking about the financial performance of the listed firms he said, “Corporate earnings have to grow until valuations are more realistic”
IPO’s in the market
Commenting on the ongoing IPO’s in the market Jafferjee said, the momentum for IPO’s which were seen in the latest IPO spree has reduced.
He said there was a time when the IPO’s were oversubscribed by 20 to 30 times, but as of now the over subscription levels have reduced to 2 to 3 times.
Jafferjee a highly acclaimed stock analyst said, this occurred especially when the Bank guarantee rule was imposed by the regulator.
According to him the use of Bank guarantee was a “self perpetuating mechanism” used by the investors to achieve their target allotment, the higher the level of over subscription, the higher the size of the application.
Murtaza Jafferjee speaking to News360.lk during last August when the CSE was performing at its best said, the particular performance of the CSE is a “bubble” and it will “burst” thus creating a huge market fall ou