A stock is simply a share of ownership in a physical company. Stock shares enable investors to buy or sell a stake in a company on a stock exchange via a bidding process. Sellers post prices at which they want to sell their shares, and buyers post prices at which they want to buy shares. This is referred to as the bid-ask spread. Understanding how the stock exchange works in India is the first step toward understanding the factors that cause a stock to rise and fall; understanding what makes stocks valuable can help you predict which ones are more likely to rise. Here are 6 reasons that cause stock prices to fluctuate.
Supply and demand: The supply and demand of stocks determine how much they cost. The price of a stock rises when more people want to purchase it than sell it. The price of a stock drops when individuals prefer to sell it rather than buy it.
Valuation of stocks: Although having more buyers than sellers is what literally drives up a stock price in India , buyers must be drawn to it. Valuation is one of the characteristics that attracts buyers to a stock. Companies can be valued in a variety of ways, but earnings per share and the P/E ratio are two of the most prevalent.
Current Market Trends: Stocks sometimes rise merely because they have been rising. Investors that use the momentum investing technique buy equities that are gaining and sell stocks that are falling. This momentum develops on itself, propelling increasing stock values even higher. This strategy, also known as relative strength investing, selects companies based on market trends rather than other traditional methods.
Economic Environment: A whole segment of market participants utilize technical analysis to determine which stocks should be bought and when. Technical analysis is an alternative way to determine supply and demand for a stock using historical and other factors. Technical analysis relies on price movements only, rather than other valuation factors.
Technical Aspects: Technical analysis is used by a large segment of market participants to choose which stocks to buy and when. Technical analysis is a method of determining supply and demand for a stock based on historical and other data. Technical analysis is based solely on price fluctuations and ignores all other aspects of valuation.
Unexpected Events: When the world comes to a standstill due to occurrence of a global event of a giant proportion, the stocks price will fluctuate. The Corona Virus pandemic is the most recent global event that caused a great stir in the global as well local Indian market. Valuation, technical analysis, and other factors may not always be as important as global events. Markets tend to sell off in times of great fear or panic, such as after 9/11 or when the coronavirus became a global pandemic, regardless of valuation or earnings. Similarly, in times of high optimism, stocks tend to trade higher, even if they are considered overpriced by traditional standards.
Regardless of how you evaluate stocks, the truth is that no one can predict whether a stock will rise or fall in value. However, the overall stock market India trend is upward in the long run. When looking for stocks that will rise in value, your best bet is to consider the following factors, which tend to drive up prices.
When it comes to investing, the bottom line is that, while certain factors can help predict stock movements, the best approach is to have a diversified portfolio. Rather than putting all of your eggs in one basket, diversifying your holdings can help smooth out the ups and downs of your individual portfolio. However, using trading platforms that come bundled with advanced analytics tools can help you predict the stock movement to a great extent. Tradeplus along with Markets Mojo offers India’s most trusted Stock and Portfolio advisory platform. This platform will provide you great help when it comes to analyzing the performance of stocks.