Cause Of Fluctuation In The Stock Market
CAUSES OF FLUCTUATIONS IN SECURITY PRICES
The prices of securities are determined by the forces of demand for and supply of shares in the stock market. The factors which affect the demand for and supply of securities resulting in their price fluctuation are as follows.
• Financial position of the company: The strong industrial base of the company directly influences the prices of its shares. When a company earns higher profi ts by increasing sales or declares higher rate of dividend, the price of its shares increases. If a company fails to pay dividend then its shareholders will start selling their holdings and the price of shares will go down.
• Demand and supply position: In stock market investing, the stock price falls if sellers overrule
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When the government gives encouragement and concessions to the expansion and diversification plan of existing units and setting up of new units, then share prices will move in the upward direction. The price of shares is also directly affected by political developments taking place both at home and abroad. The political instability in the country, the fear of war with neighbouring country, the danger of spreading war on international level, bring a setback on prices of securities. If there is political stability at home and abroad the price of shares moves up.
• Business condition: Political stability brings economic stability in country. If a government carries on economic policies in the planned manner, it then establishes strong industrial base in country, the price of shares tend to move up. In case there is a rapid change in economic policies, and budgets are announced and revised time and again, the price of securities will go down.
• Fear of nationalization: If a government adopts a policy of nationalization of industries, the investment on the part of the private sector will be at the lower ebb. As a result, the prices of the securities are bound to go down. On the other hand, the private sector is encouraged for investment by giving them due concessions; the prices of the securities shoot
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Investors who buy the stock can have variety of reasons, and that reasons would not be the same from one investor to another. They buy and sell stocks according to their strategy and needs on daily basis. The fact is, there are traders who make living out of stock trading. Therefore, the price will fluctuate based on their trading activities. Moreover, seasoned investors have stock trading software to predict when is the best time to buy or sell for maximum profits but at minimum risks. An investor can take advantage of the daily share price fluctuation if he understands how technical analysis works. It is diffi cult to stop the price fluctuation, but certainly, one can make money out of it. So, the pertinent question is why do stock prices change? The best answer is that nobody really knows for sure. Some believe that it is not possible to predict how stock prices will change, while others think that by drawing charts and looking at past price movements, you can determine when to buy and sell. The only thing which is known to us is that stocks are volatile and can cause extremely rapid change in
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