Monday, 27 June 2011

Discuss those factors which influence or fluctuate the prices of stock exchange

Causes of Fluctuation :-
Following are the important causes which influence the price of shares ans securities in the stock exchange :

1. Demand and Supply :-
Demand and supply forces play a very effective role in fluctuating the prices. If there are more buyers of a particular security than sellers its price will rise. If the buyers are few but supply is greater than price will fall.

2. Political Condition :-
Stock exchange is a very sensitive market. Political disturbance and will also affect the prices of shares in the stock exchange.

3. Confidence of Public :-
If a government or any company looses the confidence of the public, then the prices of its securities and shares fall.

4. Reputation of the Firm :-
If the company enjoys good reputation in earning profit, its shares demand and price increases.

5. Bank Rate :-
When bank rate is low people borrow the money from the banks and purchase the securities. On the other hand when bank rate is high people purchase less securities.

6. Inflation and Deflation :-
In case of inflation prices of securities will rise. While in deflation price of shares and securities fall.

7. Directors Resign :-
In case of resignation of any director public looses the confidence and the price of company shares falls.

8. Experts Opinion :-
Stock exchange market experts opinion in press about the market also affects the price of various companies shares.

9. Speculators Activities :-
The policy of the speculators also influence the prices of shares. They sometimes begins to purchase the securities of a particular companies, to increase its prices.

10. Change in Fashion and Wealth :-
A sudden change in fashion and wealth influences the shares prices of the particular company. Because change in fashion will affect the profit of the company.

11. Strikes and New Taxes :-
Strikes of labour and new taxes also affect the business of stock exchange. It reduces the prices of shares.

12. Influence of Others Stock Exchange :-
If the price of one company shares increases in one stock exchange it will also affect the price of that company shares in other stock exchange.

13. Artificial Buying :-
Sometimes underwriters begin to purchase the number of shares to create the demand. So the prices of the concerned company will rise due to artificial buying.

14. Over Production :-
If a company faces the problem of over production then it may not declare a sufficient profit to the shareholders. So the prices of the shares will fall in the stock exchange.

15. Insurance Company Influence :-
Insurance companies are very influential in changing the prices of various securities. These are considered the greatest purchaser of the securities. If the insurance company sells the shares of any company then the prices of the shares will fall. If it purchases the shares of any company then their price will rise.


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