How does the Share Price Rise or Fall? Why does the Share Price go up or down?

Asif Nawaz

How does the share price rise or fall? Why does the share price go up or down, why do the prices change? Why Stock Price Goes Up and Down | Why stock prices fluctuate | Why Stock Price Change | Why shares rise and fall | Who sets stock prices

Small retail investors like us, seeing the price of stocks going up or down in the stock market every day, feel a little scared but the same thing also seems interesting.

Because when the price of the share rises, it wants to buy the share and when the price falls, it wants to sell the share, 

But it is wrong both ways… 

If you also take quick decision only by going up or down of stock, by bullish and bearish or by rise and fall in Sensex and Nifty then you are on wrong path, 

Because first you should at least know that if a stock is continuously going up then there must be some reason behind it.

And similarly, if the price of a stock is falling continuously, then there must be some reason behind it too.

Your job is to find that reason and today we are going to discuss this topic in detail that why the price of a company's share in the stock market fluctuates up or down? It means how does the share price increase or decrease?

Let's Xplore.....

How does the share price rise or fall? Why stock prices up and down?

Every investor knows that there are ups and downs in the stock market and if we talk about why the share price decreases or increases, then there is no definite reason for this, it depends on many factors.

If the price of a stock is up today, it will be down tomorrow, there will be an uptrend in the market and sometime there will be a downturn and that is why the price of the share goes up and down.

But the most important thing is that every investor should know that how the price of a share is determined, that is, why the prices of Sensex and Nifty keep changing so quickly in the stock market (Why Sensex or Nifty moves up or down), Shares How does the price change?

And what is the reason behind it?

Below I have told you some such points with examples which explain why the stock market fluctuates and why the share price fluctuates up and down and more or less?

So let's know......


How does the share price go up and down?

How does stock price change― Before knowing about all these points you should have basic knowledge of stock market such as; 

  • How does stock market work?
  • What are Nifty and Sensex?
  • What to do before buying shares?

If you are buying shares of a company, then you should know that there is definitely some business behind it and you invest money in the business of the company through that share.

I mean you should not invest only by looking at the stock price or chart pattern, but you should also look at many other factors like how is the growth of the company and whether it is not that the company has taken too much debt What he is not able to pay…

This type of basic information you should have before buying any stock, only then you will be able to understand well why the price of any stock is more or less? And how do their prices rise or fall so quickly?

Let's start, so the first point is-

1. Company's performance (how the share price rises or falls)

You would know that every company listed in the stock market does some business in which it sells any of its products or services.

And every company has to present its quarterly results every 3 months, in which their sales and profit are told.

In the quarterly result, the company tells that how much money or loss it has made this time in comparison to the previous quarter, you can find information about it by visiting the website of NSE or BSE stock exchange.

By looking at the company's quarterly results and financial statements, you get to know how the company is performing, whether the company is making profit or is in loss.

And because of this, the price of the shares of that company is up or down, that means if the quarterly numbers of the company are good, then people start buying the shares of that company and suddenly the price increases on the second day.

Similarly, when the company has reduced its revenue or profit compared to the last time, then people start selling their purchased shares, due to which the price of that share starts decreasing.

And that's why share prices go up or down depending on how a company performs.

2. Due to news (how the share price rises or falls)

You must have often seen that if there is any fraud in any company. For example, if there is any news like insider trading on its management in a company, then the stock price of the company starts falling suddenly.

Meaning, due to any bad news, the share price suddenly comes down and due to good news, the share price starts going up.

We have seen many examples of this in the past, including a giant company like Asian Paint, on which some false allegations were made but later everything became normal.

That is why it is said that if you have faith in the business of the company, then you should not be afraid, no matter how much the share price goes up or down.

3. Due to some new announcement of the company (how the share price rises or falls)

A right decision of the company can increase its share price and wrong decision can sink your money, so keep an eye on the announcement made by the company whose share you want to buy.

Whenever a company makes a big announcement, like this time the share price decreases or increases very fast. 

For example, you can look at electric vehicles and the renewable energy sector. 

Till the last few years, there was no demand for the shares of Tata Power and Tata Motor Company, but ever since the Tata Motor Company announced the launch of the electric vehicle market, its share is seeing a steady increase. 

4. Reasons for dividend (why share price goes up or down)

When a company earns a good profit, it also gives some part of it to its shareholders, which we call dividend. But it is also true that not every company listed in the stock market pays dividends, but reinvests the profits earned in its business.

Most investors are excited about dividend, so when a company decides to pay dividend in its annual report or at the time of quarterly results, its effect is visible on the share price of that company on the next day itself.

And the share price of the company goes up rapidly because people start buying shares of that company in the greed of dividend, which increases the share price due to increase in demand.

5. Due to bonus or share buyback (why stock market fluctuates)

Like dividend, when the company announces to split the bonus share or share or wants to buyback, then there is a sharp jump in the value of the share.

6. Reasons for demand and supply (how share prices rise or fall)

How does demand and supply affect stock prices, you will know that not only the Indian stock market but every market in the world runs on the law of demand and supply.

This means that when the supply of something is less and the demand increases, then its prices also increase and similarly when the supply is very high and the demand is less then the prices fall.

You can see this demand and supply game daily in the stock market.

When the demand for power or electricity increases in the global market, then the shares of companies in the power sector start going up. This happens that without increasing the profits of companies, their share prices increase, due to which their PE Ratio also becomes very high and due to which companies start trading at expensive valuations.

Similarly, when there is a big crisis somewhere in the world, then it affects every market in the world apart from the global market. Due to this, the economy of the country weakens and the share price of strong companies listed in the NIFTY50 index also starts falling.

This means to say that the sector whose demand for the product or service increases, the share price of the companies of the sector also increases and when the demand decreases, the share price starts falling.

7. Reasons for the rise or fall in the stock market (why the share price rises or falls)

Due to the economic crisis, many times the country has to go through different dangers due to which there is a bear run situation in the market.

Inflation is a big reason for this because when there is inflation in the market, companies increase the price of their product or service, due to which people stop buying them.

And when people stop buying goods from the market, then businesses suffer and companies are not able to earn profit.

And when companies are not able to earn profit, then people start selling their purchased shares, due to which the effect of bear market is seen.

If seen carefully, this entire cycle is directly connected to inflation.

See, if you are a conscious stock market investor, then you should also keep an eye on the ongoing economic issues in the country, such as the budget announcement every year in the country, there is a lot of movement and movement in the stock market on the very next day itself.

Due to which the next day itself takes you to see the bull run or bear run in the stock index indices like Nifty and Sensex.

8. When promoters holding is more or less (why share prices keep on changing)

Promoters holding means the amount of stake held by its initial promoters, management and founders in the company.

Normally the promoter holding should be 50% or more.

If the holding of promoters in a company is very less, then you should not buy the shares of that company because it is believed that if the promoters are selling the shares of their company, then it means that they do not trust their own company. 

And that's why when the promoter holding of a company starts decreasing then people start selling the shares due to which the share price breaks down and a huge drop is seen. 

Conversely, when the promoters increase their stake in the company, the share price starts rising.

How high can the price of a share go down?

How high can a stock rise― New investors in the stock market think that any stock can go up or down but it is not true.

You must have heard about circuit filters.

When a stock goes up too much, it starts getting upper circuits and similarly when it falls too much, it starts getting down circuits.

Upper circuit and down circuit can be anywhere from 5% to 20%.

Circuits mostly work in penny stocks. Or a stock that is controlled only by the operator, that means, if the price of a stock is forcibly increased or decreased, then circuits start in it.

That's why no stock can go up or down 1000% or 2000% in 1 day because this happens only in training or cryptocurrency and not in other market.

Let me tell you that if you also want to get such high returns then it would be right for you to trade and not invest.

What causes a sudden rise in a stock? What causes a stock to spike?

Why Stock Price Fluctuate― Sometimes you see that the stock prices increase suddenly. Most of the reasons like this are news only.

As I mentioned above that the companies keep on making some announcements like this.

Factors affecting share prices in the stock market

  • To launch a hit project in the future,
  • Launching a new product,
  • Announcement of giving bonus share and dividend,
  • Working on new technology
  • Acquiring a new company

When we come to know about all these announcements in the news, then the stock prices start rising.

FAQs Related Why stocks price goes up and down?

Who raises or lowers share prices?

There are many such events in the stock market, which have a direct effect on the share price of the company, such as economic slowdown in the market, announcement of the company's results, due to good or bad news in the company, etc. Happens.

What causes the stock market to fall or rise?

If the stock market falls or rises, it means that the Sensex and Nifty go up and down. The entire stock market does this only when there is an economic crisis at the global level and when that situation becomes the same then the market starts rising due to which the share prices start rising. 

Who sets the share prices?

When a company is listed in the stock market for the first time through IPO, then it decides the price of each of its shares, at what price it will be listed on the stock exchange the next day. Then as investors buy and sell that stock, its prices start changing.

How do stock prices change?

The prices of stocks or shares fluctuate due to demand and supply. If there are more sellers than buyers in the market, then the share price starts decreasing and when there are more buyers and less sellers, then the share price starts increasing.

Conclusion "How stock prices moves up and down"

In this post I have told you how share price rise or fall, why share price fluctuate and why does Sensex or Nifty go up or down? I have told you in detail about all these in a post.

If you have any question related to this post then definitely ask in comment below.

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