SHARETIPSINFO >> Articles Directory >>What makes stock go up or down?

 

‘What makes the stock, or to be more precise the price of the stock, go up and down?’ – This is a million dollar question with a simple answer. Like the simple rule of Economics it is the demand of stock that takes the price of the stock higher. So when the demand of a specific stock rises the price of that stock also goes higher. On the other hand when the demand for that stock decreases at the stock market, the price of that stock also falls.

Depending on the demand of the stocks the price moves at the stock market. For example when the demand of the stock is on the rise, the price of that stock also goes up. Moreover, in anticipation of further rise in the price, more and more investors buy that stock creating more demand in the market that further increase the price of the stock. Then when the price reaches an optimum level and the demand settles down the price of the stock also become stable. When the demand of the stock is falling, the price of the stock also falls. In this position when the investors see a stock falling they also start selling the stock fearing further fall of the stock and to recover their investment. That further decreases the demand and price of the stock also falls further. This is quite a simple rule that predominantly make the price of the stock go up or down. This is the cyclic movement that every stock goes through at different phase. But this is way to simple an explanation to clarify the movement of the stock prices. As an investor you have to realize the factors that create the demand for a particular stock and the factors that directly and indirectly determine the demand and price of the stocks.

The first thing that determines the demand of the stock is the company itself. The demand of the stock primarily depends on how fundamentally strong is the company. If the company is making regular profit, that is if the company is posting significant profit year after year, if the company have huge asset value, if the company is having least debt in the market, moreover if the potential of the company looks good for the future, the demand of stock for the company will always be on the rise. There is another sign that also triggers the demand of stock in the stock market. That is if certain company is giving away dividend to its existing share holders consistently, it shows financial stability and growth of the company that also a positive sign for the demand of the stock.

The overall trend of the stock market is also a determining factor for the demand of individual stocks. The stock market goes through different phases from time to time depending one various factors. So when the market is in a bull phase and the buyers’ confidence is on the high, demand for almost all the stocks remain high and the price of the stocks go up. On the other side when the market is going through a bear phase and the demand of the stocks is least, almost all the stocks perform low and the price of the stocks go down. This is the general trend of the stocks to follow the overall trading pattern of the stock market.

Much like the overall market trend, the trend of the particular sectors also affects the price of the stocks of that particular sector. For example, when there was some problem in the IT sector regarding outsourcing, almost all the stocks of the IT companies went down significantly.

The overall economic and business condition of the country also affects the price of the stock. For example when the rate of Home Loan interest is increased by the banks, the stocks of the real estate industries suffer badly as their business is suffering from the hike in the interest rates.

The trend of the international markets also influence the demand and price of the stocks at the Indian stock markets Specially of major stock exchanges like NSE and BSE. The prevalent trend in the major international stock markets like NASDAQ, New York Stock Exchange, Tokyo and Shanghai stock exchange directly influence the trend of the domestic market.

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