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Stock market dynamics: Fundamentals, Expectations and Perceptions

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The stock market serves as a nexus where millions of buyers and sellers converge to engage in transactions. At its core, each transaction represents an agreement between a buyer and a seller, with the central element being the price. This price is not static; it fluctuates continuously, reflecting the equilibrium between supply and demand.

The conventional belief posits that the interplay of supply and demand in the stock market is predominantly influenced by the fundamental factors inherent to individual companies. These factors encompass a range of critical aspects, including profitability, stability, future strategic plans, and the competency of management teams.

Consequently, share prices and index levels serve as barometers of the collective sentiment and expectations of market participants regarding the future trajectory of companies and the broader market. These prices are not mere numbers; rather, they represent a synthesis of myriad factors, including investors’ perceptions, assessments, and anticipations.

Expectations and perceptions

When buyers and sellers converge in the stock market, each transaction reflects not only the current value of a company but also the perceived future potential. As investors assess various factors, such as company performance, industry trends, economic indicators, and geopolitical events, they form expectations about how these factors will impact future earnings and growth prospects. And these perceptions often vary widely, reflecting diverse interpretations of available information and differing outlooks on the potential outcomes.

These perceptions are then manifested in the bids and asks that drive share prices and index levels. If investors anticipate robust growth and profitability for a company, they may bid up its share price, reflecting optimism and confidence in its future prospects. Conversely, perceived negative sentiment or concerns about the company’s outlook may lead to downward pressure on its share price.

Share prices and index levels, such as All Share Price Index (ASPI), serve as indicators of how investors collectively view the market. As they consider factors like the economy and global events, their expectations for future market performance are reflected in these measures. Essentially, they represent the combined opinions and outlooks of investors, incorporating both current information and future predictions. This consensus is always changing as new data emerges and sentiment shifts. Therefore, these indicators are not fixed but rather reflect ongoing discussions and reactions among market participants.

Long-term investing in the stock market entails placing perceived confidence in a company’s prospects over time. However, whether driven by past performance, societal concerns like climate change or political stability, or sheer speculative sentiment (short-term focused), buyers anticipate that share prices will increase.

However, these perceived expectations are not always realized, potentially prompting investors to become sellers. This decision, too, is often driven by the perception that anticipated prospects may not materialize as expected.

Future expectations serve as the linchpin for daily market activities, shaping the equilibrium of opinions on a company’s trajectory. Yet, share prices are not isolated from external influences; they reflect investors’ perceptions relative to the company’s performance and broader market sentiments. The pervasive fear of missing out often prompts investors to make impulsive decisions, chasing returns and disregarding rational assessments. However, smaller markets, like the Colombo Stock Exchange, have often been susceptible to manipulation by a select few prominent players, as noted by stock brokers, fund managers, and investment advisors.

When to enter the market

Interestingly, shares often rally ahead of economic upturns, creating a dissonance between market performance and day-to-day economic realities. Perception may paint a rosy picture, making investment decisions seem obvious in retrospect. However, market timing remains an arduous task, requiring foresight and conviction amid prevailing sentiments.

Learning from investment mistakes is pivotal for personal growth and financial success. Detaching ego from errors fosters introspection and prevents recurrence. Avoiding perception bias is imperative, as it distorts learnings of past decisions. Writing down experiences facilitates reflection and rational analysis, aiding in the development of effective investment strategies centered on disciplined processes.

Diversification; Risk management

Diversification, as advocated by Warren Buffett, offers protection against ignorance but remains a contentious subject. While concentrating investments in a single promising asset theoretically maximizes returns, it also heightens risks. Notably, founders or controlling shareholders wield informational advantages, contrasting with minority investors subject to regulatory disclosures. Hence, inherent risks accompany stock trading. The late Dr. Lalith Kotelawela, for instance, refrained from stock market involvement for himself and his companies, equating share trading with gambling.

Instances like Enron’s collapse underscore the multifaceted risks inherent in investing, from fraud to unforeseen macroeconomic upheavals. Diversification mitigates single-security risks, safeguarding portfolios against adverse events. However, ignoring diversification in pursuit of concentrated gains poses perilous consequences.

Overtrading, driven by short-term fixations and market noise, undermines long-term investment success. Emphasizing present circumstances overlooks the enduring impact of macroeconomic trends on market performance. Maintaining perspective and focusing on long-term fundamentals are crucial for navigating market volatilities and achieving sustainable growth.

Therefore, the stock market embodies the amalgamation of perceptions on expectations, sentiments, and uncertainties. Investors must recognize the transient nature of market dynamics, learning from past mistakes and adhering to disciplined investment strategies. While concentration may offer lucrative prospects, diversification remains a prudent risk management approach. Ultimately, maintaining a long-term perspective amidst short-term fluctuations is paramount for realizing enduring investment success.

Bear and Bull markets

The stock market, a bustling arena where investors and speculators converge, showcases a remarkable sensitivity to short-term stimuli. In pivotal market years, investors frequently succumb to timing mistakes, selling in the aftermath of bear markets and buying amid bull markets. Selling in bear markets and buying amid bull markets refers to a common behavioral pattern observed among investors.

During bear markets, characterized by declining stock prices and widespread pessimism, investors often feel compelled to sell their holdings out of fear of further losses. This behaviour is driven by a desire to mitigate losses and preserve capital. However, selling during bear markets can lead to missed opportunities for future gains, as markets often rebound after periods of decline.

Conversely, in bull markets, where stock prices are rising, investor perceptions tends to be optimistic, and confidence in the market is high. During these periods, investors are more inclined to buy stocks in anticipation of further price appreciation. This behaviour is driven by a fear of missing out on potential gains and a belief that the upward trend will continue. However, buying in bull markets can also be risky, as it may result in purchasing stocks at inflated prices.

Conclusions

Overall, the tendency to sell during bear markets and buy during bull markets can be attributed to emotional responses to market conditions, rather than rational decision-making based on fundamental analysis. As a result, investors may inadvertently buy high and sell low, thereby underperforming the market over the long term.

Furthermore, understanding the direct link between investment strategies and long-term goals is paramount. Properly defining goals enhances the alignment between assets and objectives, reinforcing the resilience of investment portfolios against short-term fluctuations.

Ultimately, gaining perspective on economic data and market movements is essential. While short-term fluctuations may induce anxiety, their significance in the grand scheme of long-term financial goals is often negligible. Just as recalling the minutiae of Central Bank actions from a decade ago holds little relevance today, current market gyrations are unlikely to alter the trajectory of well-defined investment strategies over the long term.

Finally, navigating the intricacies of the stock market demands a steadfast commitment to long-term investing principles. By transcending short-term noise and anchoring decisions on fundamental values and overarching goals, investors can weather market volatility and chart a course towards enduring financial success.

(The writer, a senior Chartered Accountant and professional banker, is Professor at SLIIT University, Malabe. He is also the author of the “Doing Social Research and Publishing Results”, a Springer publication (Singapore), and “Samaja Gaveshakaya (in Sinhala). The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the official policy or position of the institution he works for. He can be contacted at saliya.a@slit.lk and www.researcher.com)



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Mannar’s silent skies: Migratory Flamingos fall victim to power lines amid Wind Farm dispute

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Victims: Flamingos / Birds found dead in Mannar

By Ifham Nizam

A fresh wave of concern has gripped conservationists following the reported deaths of migratory flamingos within the Vankalai Sanctuary—a globally recognised bird habitat—raising urgent questions about the ecological cost of large-scale renewable energy projects in the region.

The incident comes at a time when a fundamental rights petition, challenging the proposed wind power project, linked to India’s Adani Group, remains under examination before the Supreme Court, with environmental groups warning that the very risks they highlighted are now materialising.

At least two flamingos—believed to be part of the iconic migratory flocks that travel thousands of kilometres to reach Sri Lanka—were found dead after entanglement with high-tension transmission lines running across the sanctuary. Another bird was reportedly struggling for survival.

Professor Sampath Seneviratne, a leading ornithologist, expressed deep concern over the development, noting that such incidents are not isolated but indicative of a broader and predictable threat.

“These migratory birds depend on specific flyways that have remained unchanged for centuries. When high-risk infrastructure, like poorly planned power lines, intersect these routes, collisions become inevitable,” he said. “What we are witnessing now could be just the beginning if proper mitigation measures are not urgently implemented.”

Environmentalists argue that the Mannar region—particularly the Vankalai wetland complex—is one of the most critical stopover sites in South Asia for migratory waterbirds, including flamingos, pelicans, and various species of waders. The sanctuary’s ecological value has also supported a niche with growing eco-tourism sector, drawing birdwatchers from around the world.

Executive Director of the Centre for Environmental Justice, Dilena Pathragoda, said the incident underscores the urgency of judicial intervention and stricter environmental oversight.

“This tragedy is a direct consequence of ignoring scientifically established environmental safeguards. We have already raised these concerns before court, particularly regarding the location of transmission infrastructure within sensitive bird habitats,” Pathragoda said.

“Renewable energy cannot be pursued in isolation from ecological responsibility. If due process and proper environmental impact assessments are bypassed or diluted, then such losses are inevitable.”

Conservation groups have long cautioned that the installation of wind turbines and associated grid infrastructure—especially overhead transmission lines—within or near sensitive habitats could transform these landscapes into lethal zones for avifauna.

An environmental activist involved in the ongoing legal challenge said the latest deaths validate earlier warnings.

“This is exactly what we feared. Development is necessary, but not at the cost of biodiversity. When projects of this scale proceed without adequate ecological assessments and safeguards, the consequences are irreversible,” the activist stressed.

The debate has once again brought into focus the delicate balance between renewable energy expansion and biodiversity conservation. While wind energy is widely promoted as a clean alternative to fossil fuels, experts caution that “green” does not automatically mean “harmless.”

Professor Seneviratne emphasised that solutions do exist, including rerouting transmission lines, installing bird diverters, and conducting comprehensive migratory pathway studies prior to project approval.

“Globally, there are well-established mitigation strategies. The issue here is not the absence of knowledge, but the failure to apply it effectively,” he noted.

The timing of the incident is particularly worrying. Migratory flamingos typically remain in Sri Lanka until late April or May before embarking on their return journeys. Conservationists warn that if hazards remain unaddressed, larger flocks could face similar risks in the coming weeks.

Beyond ecological implications, experts also highlight potential economic fallout. Wildlife tourism—especially birdwatching—contributes significantly to local livelihoods in Mannar.

 Repeated reports of bird deaths could deter eco-conscious travellers and damage the region’s reputation as a safe haven for migratory species.

Environmentalists are now calling for immediate intervention by authorities, including a temporary halt to high-risk operations in sensitive zones, pending a thorough environmental review.

They stress that protecting animal movement corridors—whether elephant migration routes or avian flyways—is a fundamental pillar of modern conservation.

As the controversy unfolds, one question looms large: can Sri Lanka pursue sustainable energy without sacrificing the very natural heritage that defines it?

Pathragoda added that for now, the sight of fallen flamingos in Mannar stands as a stark reminder that development, if not carefully planned, can carry a heavy and irreversible cost.

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‘Weaponizing’ religion in the pursuit of power

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President Donald Trump; miscalculating in M-E / Ayatollah Khomeini; Architect of Iranian Revolution

A picture of US President Donald Trump apparently being prayed for by supporters, appearing in sections of the international media, said it all loud and clear. That is, religion is being flagrantly leveraged or prostituted by politicians single-mindedly bent on furthering their power aspirations.

Although in the case of the US President the trend took on may be an exceptionally graphic or dramatic form, the ‘weaponizing’ of religion is nothing particularly new, nor is it confined to only religiously conservative sections of the West. For example, in South Asia it is an integral part of politics. The ‘South Asian Eight’ are notorious for it and it could be unreservedly stated that in Sri Lanka, the latter’s ethnic conflict would be more amenable to resolution if religion was not made a potent weapon by ambitious politicians of particularly the country’s South.

The more enlightened sections of Christian believers in the US may not have been able to contain their consternation at the sight of the US President apparently being ‘blessed’ by pastors claiming adherence to Christianity. Any human is entitled to be blessed but not if he is leading his country to war without exhausting all the options at his disposal to end the relevant conflict by peaceful means.

More compounded would be his problem if his directives lead to the death of civilians in the hundreds. In the latter case he is stringently accountable for the spilling of civilian blood, that is, the committing of war crimes.

However, the US along with Israel did just that in the recent bombings of Iran, for instance. The majority of the lives lost were those of civilians. If the US President is endowed with a Christian conscience he would have paused to consider that he is guilty of ordering the taking of the life of another human which is forbidden in the teachings of Jesus Christ.

Moreover, the ‘pastors’ praying over the US President should have thought on the above lines as well. May be they were in an effort to curry the President’s favour which is as blame-worthy as legitimizing in some form the taking of civilian lives. Apparently, the realisation is not dawning on all Christian conservatives of the US that some of these ‘pastors’ could very well be the proverbial false prophets and the latter are almost everywhere, even in far distant Sri Lanka.

However, the political reality ‘on the ground’ is that the Christian Right is a stable support base of the Republican Right in the US. Considering this it should not come as a surprise to the seasoned political watcher if the Christian Right, read Christian fundamentalists, are hand-in-glove, so to speak, with President Trump. But it is a scathing indictment on these rightist sections that they are all for perpetrating war and destruction and not for the fostering of peace and reconciliation. Ideally, they should have impressed on their President the dire need to make peace.

That said, political commentators should consider it incumbent on themselves to point out that religion is being ‘weaponized’ in Iran as well. Theocratic rule in Iran has been essentially all about perpetuating the power of the clerical class. The reasons that led to the Islamic Revolution in Iran are complex and the indiscreet Westernization of Iran under the Shah dynasty is one of these but one would have expected Iran to develop from then on into a multi-party, pluralistic democratic state where people would be enjoying their fundamental rights, as enshrined in the Universal Declaration of Human Rights, for example.

Moreover, Iran should have taken it upon itself to be a champion of world peace, in keeping with its Islamic credentials. But some past regimes in Iran had vowed to virtually bomb Israel out of existence and such regional policy trajectories could only bring perpetual conflict and war. Considering the current state of the Middle East it could be said that the unfettered playing out of these animosities is leading the region and the world to ‘reap the whirlwind’, having recklessly ‘sowed the wind’.

However, religious fundamentalism-inspired conflict and war has spread well beyond the Middle East into almost every region since 1979, the year of the Islamic Revolution in Iran. So much so, knowledgeable opinion now points out that religious identity has come to replace nationalism as a principal shaper of international politics or “geopolitics”, as quite a few sections misleadingly and incorrectly term it.

Elaborating on the decisive influence of religious identity, the well known and far traveled Western journalist Patrick Cockburn says in his authoritative and comprehensive book titled, ‘The Age of Jihad – Islamic State and the Great War for the Middle East’ at page 428 in connection with the war in Chechnya ; ‘If nationalism was not entirely dead, it no longer provided the ideological glue necessary to hold together and motivate people who were fighting a war. Unlike the Islamic faith, it was no longer a belief or a badge of identity for which people would fight very hard.’ (The book in reference was published by VERSO, London and New York).

In his wide coverage of Jihadist Wars the world over Cockburn goes on to state that today a call from a cleric could motivate his followers to lay down no less than their lives for a cause championed by the former. The 9/11 catastrophe alone should convince the observer that this is indeed true.

However, as often pointed out in this column, there is no alternative but to foster peace and reconciliation if a world free of bloodshed and strife is what is being sought. Fortunately we are not short of illustrious persons from the East and West who have shone a light on how best to get to a degree of peace. Besides Mahatma Gandhi of India, who was the subject of this column last week, we have former President of Iran Mohammad Khatami, who made a case for a ‘Dialogue of Civilizations’ rather than a ‘Clash of Civilizations’.

The time is more than ripe to take a leaf from these illustrious personalities, for, the current state of war in the Middle East has raised the possibility of a war that could transcend regional boundaries. The antagonists are obliged to exhaust all the peaceful options with the assistance of the UN system. Besides, war cannot ever have the blessings of the sane.

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Venerable Rahula Thera’s 35-year green mission and national Namal Uyana

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Venerable Rahula Thera

It was 35 years ago, on March 28, 1991, that Venerable Rahula Thera, then a young monk, embarked on a journey to the Na forest in Ulpathagama, Palagama, in the Anuradhapura District. Today, three and a half decades later, this mission stands as living proof of the enduring bond between Buddhist philosophy and the natural world.

Marking the 35th year of this green mission, Rahula Thera’s relentless dedication has transformed the National Namal Uyana into an environmental landmark admired not only across Sri Lanka but around the globe, as well.

When studying the life of Venerable Rahula Thera, one cannot ignore the profound connection between Buddhism and the environment. Buddhism is a philosophy deeply attuned to nature. The historical use of the sacred “Na Ruka” by all four Buddhas: Mangala Buddha, Sumana Buddha, Revata Buddha, and Sobhita Buddha — for enlightenment —demonstrates that from time immemorial, Buddhism has maintained a sacred bond with the Na tree. From the birth of Siddhartha to his enlightenment, the propagation of the Dharma, and even the great Parinirvana, all of these milestones unfolded in verdant, living landscapes.

Venerable Rahula Thera did not embark on the Namal Uyana mission seeking government support or personal gain. His commitment sprang from a deep devotion to the Buddha’s teachings on grove cultivation. A grove cultivator is one who spreads compassion for nature. As the Vanaropa Sutta teaches:

Venerable Rahula Thera reclaimed Namal Uyana which was then under the control of timber smugglers and treasure hunters. The term “Wanawasi” does not merely mean living in a forest; it signifies finding rest and enlightenment through nature, free from the destructive roots of greed, sin, and delusion.

Another defining aspect of Venerable Rahula Thera’s 35-year mission is the purification of the human mind. He has consistently taught the thousands who visit Namal Uyana that a person who loves a tree will never harm another human being. As the Dhamma proclaims:

It is important to remember that Venerable Rahula Thera devoted his life, without fear, speaking the truth and taking necessary action, tirelessly advancing the national mission he began. From 1991 to the present, he has worked with every government elected by the people, maintaining impartiality and independence from political ideology. Yet, he never hesitated to raise his voice fearlessly against any individual, of any rank or party, who committed wrongdoing.

Religious and Social Mission

The National Namal Uyana is not merely a forest; it is a magnificent heritage site, dating back to ancient times. Scattered across the landscape are boundary walls, the remains of ancient monastery complexes, and stone carvings believed to date back to the reign of King Devanampiyatissa. In earlier centuries, this sacred land had served as a meditation sanctuary for hundreds of monks. The name “National Namal Uyana,” by which this ecological and archaeological treasure is known today, was introduced by Venerable Rahula Thera in 1991. The government’s later recognition of the site as the National Namal Uyana stands as a significant achievement for both religion and national heritage.

Venerable Rahula Thera is a monk who has lived a life of renunciation. A striking example of this is his decision not to assume the position of Chief Incumbent of the National Namal Uyana Viharaya, instead entrusting the temple to the Ramanna Nikaya and its trustees. In doing so, he set a precedent for the contemporary Sangha. The Thera himself stated that he was merely the trustee of Namal Uyana, not its owner.

Legacy and Continuing Inspiration

The 35th anniversary of Venerable Wanawasi Rahula Thera’s arrival at Namal Uyana is not merely the commemoration of a period of time; it is a message of nature to future generations. Through his work, the Thera revived the ancient Hela tradition of loving trees and venerating the environment as something sacred. This religious and environmental mission remains unforgettable.

The revival experienced by Namal Uyana, after the arrival of Venerable Wanawasi Rahula Thera, is beyond simple description. Some of the major accomplishments achieved under his leadership include:

* Securing and protecting the largest Rose Quartz (Rosa Thirivana) reserve in South Asia.

* Restoring the Na forest spread across hundreds of acres, providing shelter to numerous rare plants and animal species.

* Transforming the area into a living centre for environmental education, offering practical learning experiences for thousands of schoolchildren and university students.

* Drawing the attention of world leaders and international environmentalists to Sri Lanka’s unique environmental heritage.

In recognition of his immense contribution to environmental conservation, Venerable Rahula Thera was honoured with the Presidential Environment Award and the Green Award in 2004—a significant moment in his life. Yet the Thera himself has always remained devoted to the work rather than the recognition it brings, making such appreciation even more meaningful.

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