Beware of the bubble.

The spectacular rise in the prices of certain shares from March 25, 2020 to date has left investors gasping for breath.

The invasion of Covid-19 dented the KSE-100 index, which reached its nadir of 27,229 points on March 25 last year. From there onwards, the index displayed an upward spiral that over the last 10 months has gradually reached 45,984 points. This represents a 31-month high and a massive recovery of 69 per cent.

During the same period, price gains in certain stocks have been mind-blowing: two stocks in the technology sector have left analysts scratching their heads. TRG Ltd was languishing at Rs12.87 on March 25. It is now trading at Rs109.50, up 751pc in 10 months.

Netsol Technologies that no one was picking up at Rs27.16 is now doing brisk business at the price of Rs188.05, up 592pc.

Who will end up holding the dirty end of the stick this time around? The same small shareholder with small means who has returned to the market yet again dreaming of making a fortune

Even though wise men at the market argued that the technology sector would swim against the tide and grow amid the pandemic, the phenomenal outperformance by TRG and Netsol has left marketmen floundering to find a proper reason.

Neither of two companies has a balance sheet as strong as a rock. Nor have they showered wealth on their shareholders in enviable dividends. Is it then just hot air that has created the bubble? No one can say how many of such bubbles are forming and floating in the market. But what is certain is that it can lead to a catastrophe.

When the Securities and Exchange Commission of Pakistan (SECP) was asked about abnormal price rises and whether the regulator believed price bubbles were forming and how it intended to deal with them, a spokesperson for the apex regulator said: 'The share price of a listed company may change due to multiple factors. The SECP and the Pakistan Stock Exchange (PSX) have dedicated mechanisms and systems to monitor trading activity with the help of specialised tools and any wrongdoing detected has to be processed as per relevant provisions of the law.'

The SECP representative went on to affirm: 'Any sudden increase in the prices of stocks is duly noticed and stocks with unusual price or volume fluctuations are examined for identification of any market abuse.'

The PSX on Thursday handed out notices to around a dozen companies asking them to explain the reasons for the 'unusual movement' in their stock prices or to state if...