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Why do stock prices fluctuate? June 21 2021Why do stock prices fluctuate?

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Reasons for fluctuations in Indian stock market

You might observe the stock market fluctuating every day. You would have read stock news from the previous day, which states that HPCL climbed 0.7 percent, Yes Bank dropped 0.35 percent, and Reliance Industries was flat with a positive 0.01 percent. Furthermore, these variations can be astonishingly huge in a single trading day, such as when Titan surged +18 percent in a single trading session for example.

What causes these fluctuations? Why are stock prices so volatile? What factors influence stock prices?

Understanding the reasons for stock price volatility is critical for better stock market performance.

You can witness two types of people in the market.

·        People who demand

·        People who supply

The term "supply" refers to the total number of people eager to sell their stock at any given price.

The term "demand" refers to the total number of people who are willing to buy something at any price

The price of stocks in the share market are primarily determined by demand and supply of the stocks prevailing in the market.

Market Equilibrium

Market equilibrium is defined as the point when supply and demand meet, i.e., all possible buyers and sellers trade until one agrees on a price.

Price rise and fall

The stock price rises when the number of people ready to buy the stock (demand) exceeds the number of people who want to sell the stock (supply).

When the number of people wanting to sell a stock (supply) exceeds the number of people wanting to buy a stock (demand), the stock price falls.

Although it is simple to argue that price changes are caused by demand and supply, understanding what causes demand and supply is a tricky topic to understand.

People like some stocks and dislike others for a number of reasons, which we''ll go through next.

The main indicators which affect the Demand and Supply of a stock are as follows.

1 A company revealing important news.

When a company reveals important news, when the news is positive demand for that company rises. When the news is negative, demand falls and people attempt to sell their stocks. People can sometimes be unsure if the news is neutral.

2 Strategies and Ideas of different investors

You would have never seen two investors who agree on everything when it comes to a stock. Every investor has his or her own strategies and ideas. Some investors prefer the stock, while others may not (due to various reasons). The demand for a stock is also influenced by the investor’s differing opinions and strategies.

3 Psychological Factors

 The stock market is driven by emotions, and greed and fear are the driving forces. When people are greedy, the demand for stocks rises. When investors are fearful, they want to sell all of their stocks and get out of it, causing a supply spike. The stock price fluctuates as a result of investors greed and fear. However, no one is greedy or afraid at the same time.

4 Other significant factors

There are a variety of other factors that influence share market fluctuations. Changes in government policies (new charges, increases in excise duty, sales tax, annual budget), Natural disasters, fluctuations in bank interest rates, participation of domestic and international institutional investors, fluctuations in international indexes such as the Dow Jones in the United States, the DAX in Germany, the Nikkei in Japan, etc., people's speculations, political instability, country's economic, business conditions, etc.

Conclusion

Now that you've read about the factors that cause stock prices to rise or fall, you're ready to open your trading and demat accounts and start navigating the stock market. Today, you can open an online trading account in minutes on trading platforms like Indira securities

When you open a trading account with Indira Securities, you gain access to cutting-edge technological tools that enable you to keep track of the stock market's ups and downs and make informed decisions.

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