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Factors Affecting Stock Market: Supply and Demand

The stock market is affected by many factors, both internal and external to companies. Internally, company performance, revenue, profits and debt levels can significantly impact a company's stock price. Externally, investor sentiment, interest rates set by central banks, political and economic stability, natural disasters, currency exchange rates and current events all influence the overall stock market and prices of individual stocks. Understanding these factors is important for investors seeking to reap rewards from carefully studying market fluctuations over time.

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Ayushi Kansara
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151 views2 pages

Factors Affecting Stock Market: Supply and Demand

The stock market is affected by many factors, both internal and external to companies. Internally, company performance, revenue, profits and debt levels can significantly impact a company's stock price. Externally, investor sentiment, interest rates set by central banks, political and economic stability, natural disasters, currency exchange rates and current events all influence the overall stock market and prices of individual stocks. Understanding these factors is important for investors seeking to reap rewards from carefully studying market fluctuations over time.

Uploaded by

Ayushi Kansara
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Factors affecting stock market

The stock market is considered a risky prospect. However, if we study the market in
great detail and invest enough time on market fluctuations, you can reap the
rewards. There are a lot of factors affecting the prices of stocks which affects the
Stock Market .
Supply and demand

If a company is doing well and everyone wants to buy shares of the same company,
there will be a shortage of shares, leading to the shooting up of the stock price of the
company. And the opposite happens if there are too many shares available, but no
one wants to buy them. The stock price will plummet in that case.

Company related factors

It is obvious that if a company has public shares, then anything that is happening
within the company will directly affect the share price. So, if the company is on the
rise, with successful product launches, increased revenue, reduced debt, and more
influx of investor capital, then the stock price of the company is bound to increase,
because everyone would want to buy shares of such a company that is going from
strength to strength.

Investor sentiment

The sentiments of the investors themselves can also influence stock market prices. If
investors are taking greater risks and investing aggressively, then stock prices will go
up. On the other hand, if investors are more subdued, choosing safety over risk, then
the stock prices will come down. There are two factors in this aspect:

Interest rates

The goings on at the Reserve Bank of India directly affect stock prices. The RBI
decides the interest rates in India and they keep changing it at regular intervals to
stabilise the Indian economy. Naturally, a higher interest rate will mean that
companies will have to pay more for loans, resulting in lesser profits.

Politics
One of the most important factors affecting stock market in India is the political
climate of the country. If the political climate is dire, with the government appearing
weak, risk of war, or if the public sentiment regarding the current government is not
good, the price of stock will go down.

Current events

News and other current events also affect the stock market. Current events that
affect the stock market include any political turmoil, civil war or riots, or terrorist
attacks. All these events are bound to make stock prices go down drastically and
affect the market volatility.

Natural calamities

Calamities like earthquakes and floods drastically reduce the stock market price. This
happens due to many reasons, like destruction of property and other assets. This
causes companies to incur heavy losses which leads to falling of stock prices.

Exchange rates

How the Indian rupee stands in relation to the dollar or other foreign currency is also
one of the factors affecting share prices in India. A strong rupee means that our
economy is growing and this will lead to higher stock prices. However, there are
different repercussions for different people in situations where the performance of
our currency is concerned.

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