Have you wondered, what red flashing line comes on the bottom of news channels? That is the up-to-date prices of the stock market of different stocks. This price keeps on fluctuating depending on the nature. It is never stable, there are minute fluctuations every time.
So, a question arises “ What are the factors affecting the stock prices actually”? No worries will make it simple for you to understand.
Stock Market – Introduction
A stock market is a platform where investors buy stocks, bonds, shares, and derivatives of the registered company in return to get valuable equity. This is a digital mode of exchange. This market is divided into primary and secondary markets.
The Primary Stock market has a first-time opening of shares after getting registered by IPO. While the secondary stock market, trading of the shares registered is done. Securities and Exchange Board of India (SEBI) governs the stock market of India.
Why Is The Stock Market Risky?
The market here reacts to various internal as well as external factors which make the market a bit risky and hard to understand. Stock Market needs patience and practice to understand. Also after this sometimes minute mistakes happen which is not in hands of investors. A key part of the stock market investment is volatility, this needs to manage to get huge returns in the future.
Although, it is always advised to research and understand properly before taking any actions related to investments.
Factors Affecting Stock Market
There are a number of reasons due to which the stock market experiences fluctuations. Some of them are discussed below:
-
Supply and Demand
You must have gone through this word in economics, the rise of demand and so the supply and vice-versa. The stock market is also gets affected by supply and demand reasons.
The imbalance between the two may lead to fluctuations further. If the demand for particular stocks is huge and there are less number of stocks of the same, the price will rise, and hence the market rises. Vice-versa happens when the stock demand is less.
-
Interest Rates
After demand and supply, interest rates are one of the reasons affecting the stock market. The Reserve Bank of India regulates the monetary policy of repo rates, reverse repo rates, and so on. This is done to check on the inflation and stability of the economy.
Any hike in interest rates will take a toll on the stock market. For example, if the interest rates make a loan expensive which generates lesser profits and hence brings the stock price down. On the other hand, if the enterprises borrow it at cheaper rates from institutions it might rise up the share prices.
-
Current Events
The events occurring either domestically or internationally also affects the stock market price. If the events are stated to be positive for the investors and the business in wholesome, the price will reflect the same for the stock market. Also, if the events are negative the same downfall in prices will be witnessed.
-
Exchange Rates
The currency values too have an effect on the share price. The Indian rupee with a dollar has these effects. It is termed as one of the major reasons behind fluctuations. The stronger the rupee is the more beneficial for economic growth and hence the stock price.
How Do Sentiments Affect The Stock Market?
Any information passed on to the people, be it of war or pandemic. This makes people think of the stock and its behavior in the current and future growth of the market. This sudden change in plans makes people haphazardly pull out money they invested and sit back to reflect it on the share price.
Conclusion
There are a lot of factors that affect the stock market prices and their monetary movements. Even sometimes the professionals here could not figure out the balance of the market. The prediction might go wrong as it changes from one moment or another.
But if you are a regular investing kind of person, these minor fluctuations might not bother you.
