Basics Of Stock Market - Intermediate

India's Share Price Factors What are the influences that affect stock prices?

Stock markets are volatile.Variables can cause volatility. Changes in stock prices are influenced by the following factors:

  • Sentiment of the market
  • Performance of the industry
  • Government policies
  • News from the company
  • Market Capitalization

The share price is determined by market forces like supply and demand. Stocks are bought by optimist investors, while stocks that are not so optimistic are sold by pessimistic investors.

Herd instinct is another factor that drives stock prices. If investors are more inclined to buy a stock, then the price will rise. Or, if people want to sell the stock, the stock's supply increases and prices fall, resulting in a bearish market.

Stock performance is largely determined by the industry in which the company operates. The stock prices of companies within the same industry move together often.

If they are in the same market, however, every once in awhile a company can also benefit from bad news for its rival.

Stock prices are also affected by economic and government conditions. Stock prices are affected by changes in interest rates, economic policies, inflation, deflation, and fluctuations in global economic conditions like crude oil prices, war, and natural calamities.

Stock prices can also fall due to political and economic shocks, such as an act terrorist.

The company's fundamentals can often determine which stocks are preferred over others. Share prices are affected by company-specific factors such as:

  • Earnings and Profits
  • Dividends, share splits, and buy-backs
  • Change in management, mergers etc..
  • Layoffs of employees
  • Recall of products or new product introductions

Stock prices are often a key indicator of a company’s worth. Understanding a company's market capitalization is the best way to determine its true worth. Multiplying the price of each share by its outstanding can calculate market capitalization.

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