When it comes to stock market investment, we often hear people asking why stock prices go up and down? Investors often wonder what makes share prices fluctuate so wildly that too at the spur of the moment.
Well, prices of stocks fluctuate due to demand and supply in the market. When more people want to buy a particular stock, its market price is likely to increase. On the other hand, if more people are wanting to sell a stock, its price is likely to go down. Apart from the supply and demand in the market there are several other factors which drives stock prices up and down.
Let’s look at various factors which affect share prices and stock market investments.
News can impact your stock market investments
When there is positive news for a company its share prices are likely to go up. For example if government decides to reduce the GST on luxury cars from 28% to 18% it will be very beneficial for luxury car manufacturers. This could have a positive impact on the companies engaged in manufacturing luxury cars in form of increased sales and hence the share price of such companies are likely to go up.
Similarly when there is news of a company acquiring its competitor, effectively reducing competition can be considered as a positive news for the company and in such a situation it share prices are likely to increase.
On the other hand when there is negative news for a company, its share prices are likely to fall. For example if an automobile manufacturer decides to recall a certain model of it vehicles from the market on account of a manufacturing defect, this will have a negative impact on the company and hence the share prices of the company is likely to go down
Fall in earnings can impact your stock market investments
Earnings are a crucial factor for a company’s survival, growth and expansion. Analysts create a projection of company’s forward earning based on current earnings. If there is a fall in earnings of the company over multiple quarters, investors are likely to dump the stock leading to a fall in its share price.
Global factors can affect your stock market investments
In today’s borderless world where world economies are connected, global events can affect stock market investments in any market. For example whenever there is an increase in oil prices, share prices in domestic markets fall. Similarly due to whenever there are fresh tariffs levied on by America and China as a part of their trade wars, stock markets have fallen. Such global events have affected domestic stock market investments too.