Factors affecting Stock market

Like any other commodity, in the stock market, share prices are also dependent on so many factors. So, it is hard to point out just one or two factors that affect the price of the stocks. There are still some factors that are that directly influence the share prices. Demand and Supply - This fundamental rule of economics holds good for the equity market as well. The price is directly affected by the trend of stock market trading. When more people are buying a certain stock, the price of that stock increases and when more people are selling he stock, the price of that particular stock falls. Now it is difficult to predict the trend of the market but your stock broker can give you fair idea of the ongoing trend of the market but be careful before you blindly follow the advice. News - News is undoubtedly a huge factor when it comes to stock price. Positive news about a company can increase buying interest in the market while a negative press release can ruin the prospect of a stock. Having said that, you must always remember that often times, despite amazingly good news, a stock can show least movement. It is the overall performance of the company that matters more than news. It is always wise to take a wait and watch policy in a volatile market or when there is mixed reaction about a particular stock. Market Cap - If you are trying to guess the worth of a company from the price of the stock, you are making a huge mistake. It is the market capitalization of the company, rather than the stock, that is more important when it comes to determining the worth of the company. You need to multiply the stock price with the total number of outstanding stocks in the market to get the market cap of a company and that is the worth of the company. Earning Per Share - Earning per share is the profit that the company made per share on the last quarter. It is mandatory for every public company to publish the quarterly report that states the earning per share of the company. This is perhaps the most important factor for deciding the health of any company and they influence the buying tendency in the market resulting in the increase in the price of that particular stock. So, if you want to make a profitable investment, you need to keep watch on the quarterly reports that the companies and scrutinize the possibilities before buying stocks of particular stock. Price/Earning Ratio - Price/Earning ratio or the P/E ratio gives you fair idea of how a company's share price compares to its earnings. If the price of the share is too much lower than the earning of the company, the stock is undervalued and it has the potential to rise in the near future. On the other hand, if the price is way too much higher than the actual earning of the company and then the stock is said to overvalued and the price can fall at any point. Before we conclude this discussion on share prices, let me remind you that there are so many other reasons behind the fall or rise of the share price. Especially there are stock specific factors that also play its part in the price of the stock. So, it is always important that you do your research well and stock trading on the basis of your research and information that you get from your broker. To get benefit from the effective consultancy service it is therefore always better from professional stock trading companies rather than getting lured by discount brokerage advertisements that you must be coming across everyday.

The advantage is that. its trading volume can be sustained as more private traders can afford to buy and sell the stocks. the stock price will drops with the same proportion of the number of exercised shares. Look. In general. Bonus Issue Bonus issues are additional shares distributed by the company to its shareholders.Dividend Effect I love dividend as much as you do. its share price will generally drops from $55 to $54 per share right after the ex-date. In fact. if the stock decided to give one new share for every four shares own by the shareholders. And if the stock is cheaper. but apparently. who own the stocks have the same thinking as you do. This can happen because they are investors who want to receive the dividends but have no plan to hold the stock any further. this is the best way to maintain its stock price at cheaper cost without splitting the stocks. Investors. Warrants Exercise Warrants give you the right to buy shares from a company after the exercise date at predetermined price. As a result. the stock price will drop by 20 per cent. Theoretically. if the exercised share is 20 per cent of the existing number of shares. the company able to reinvest the dividend cash for better earnings growth while awarding their loyal shareholders. For instance. it comes with a price tag. the stock prices will fall with the same ratio of bonus issued. Instead. if GE decided to distribute $1 per share as dividend to its shareholders. the stock price will drops in the same value as the dividend paid right after the exdate eventually. For instance. . it does not comes for free. Therefore. to sell the stock right after they got the pay check. its earnings will be diluted as more shares are sharing the same profits pie. For example. the stock price will normally drops by 20 per cent as well.

Most of the times. One can gauge the market sentiment by looking at stock indexes or its future price movement. ASX (Australia). In US. FTSE 100. investors and traders always assess a company based on its Earning Per Share (bottom line) and Revenue (top line) and its future earning potential. Sometimes. in turn driving down the stock price. Federal Reserve's federal funds rate (fed funds rate). Euronext 100. DAX. But when rates change what effect does that have on the stock market? The market does not immediately become affected by a change in interest rates. the stock price of the companies in the same industry will move in tandem with each other. Nasdaq (USA). companies generally report the earnings results every quarter-yearly. The Fed increased the rate to borrowing banks. Therefore. Dow Jones Industrial Index. This is because market conditions will generally affects the companies in the same industry the same way. TECDAX (Germany). FTSE All Shares.Interest Rates y Anyone with a credit card or loan clearly understands how he or she becomes personally affected by interest rates changes. Euronext 150 (Europe Union). The price of the stock of a company is affected most of the time by the general market direction during a session. 888888888888888888888888888888888888888888888888888888888888888888888888888 8888888888888888888888888888888888888888888888888888888 88888888888888888888 Market sentiment. Borrowing banks increase the rate to businesses. A company that achieves good earning results (EPS and Revenue) expects a boost in its share price and one . Of course. The Federal Reserve (the Fed) charges borrowing banks the U. The Fed uses this rate to curb inflation---caused when too much money enters the market and not enough goods and services get purchased. If enough companies experience these symptoms it can impact the stock market as a whole.S. The stock indexes are S&P 500. · The earning results and earning guidance. the stock price of most companies will rise and in a bear market the stock price of most companies will fall. FTSE Techmark (United Kingdom. When businesses spend more on financing the company's growth can suffer. The main objective of a company is to make profit. The performance of the sector or industry that the company is in also plays in part in determining the stock price of the company. there are exceptions to this. · The performance of the industry. ASX100. the stock price of a company will benefit from a piece of bad news in its competitor if the companies are competing for the same target market. The change happens slowly and trickles down to the market as a whole. In a bull market. Nikkei 225 (Japan).

share buy-back is quite often used as a tool to deliver value to the investors. In general. . In some minority cases. This is because anyone buying a stock on or after the ex-dividend date are not entitled to the corresponding dividend payment. This also applies to an existing product that breaks into new markets. Therefore. a company may also issue guidance (expected value) for the EPS and Revenue in coming quarter or coming years. a company can be bought over by cash or stock (of the acquirer) or a combination of the two. besides reporting the EPS and Revenue for the past quarter. The act of share buy-back by a company will reduce the number of share available in the open market. this will normally help increase the share price. Those companies that fail in the contract bidding normally experience the fate of sell-off in its stocks. · Dividend. · New major contracts or major Government Orders. this is often observed in surges in stock prices of pharmaceuticals companies after the announcement of successful clinical trials. Sometimes. or FDA approvals for new drugs. The investors may also see the share buy-back by company as a confidence booster for them in the company itself. a company being taken-over is anticipated to get a stock price boost and the company taking over another company shall experience a drop in its share price. Depends on the agreed term. However. A company that is able to obtain new major contracts or major government order is expected to see a bull run in its stock price. meaning it is being bought over at a higher price than its last traded stock price. · Share buy-back. After the announcement of a dividend. the continuing buying back of share of a company will also acts as a support for the share price that helps to maintain or increase the share price. a reduction in share available for trading in this case will cause a drop in supply. the stock price may drop on the exdividend date by the dividend per share amount. The introduction of new product to market is seen as a revenue enhancer for a company. · Take-over or merger. the prospect of a new product introduction suffices to improve the stock price of a company. This is assuming that the company is being taken over at a premium. the stock price of the acquirer may get a boost if it is perceived that the acquisition shall contribute to its earning or revenue in the near future. Also.that delivers poor earning result shall see a beating in its share price. This is also closely monitored by investors and is an important factor that will affect the company stock price. The stock price may increase by an amount close to the dividend per share value. · New product introduction to markets or introduction of an existing product to new markets. Sometimes. Due to the law of supply and demand.

· Addition/Removal to/from Stock Index. Hedge fund stock buying and selling are another source of information regarding the flow of "smart money". So in this case. it is generally observed that the stock price increases (after taking into account the increase in the number of share) after a stock split. However. taking into account the change in number of shares). For example following a extremely disappointing earning result. A savvy investor should know how to observe and filt er out this piece of information from your investment or trading decisions. board directors etc. it may not signal anything significant about the company. Insiders include CEO. The investment decision of highly revered investment gurus like Warren Buffett. Dow Jones U. should not have an impact to the stock price. Nasdaq-100. This is being watched closely by savvy stock investors/traders. some attributed this to the perception of cheap stock due to the lower stock price after the stock split. it is very likely that by then the stock price of that company has already priced-in the poor earning result. George Soros. Carl Icahn are closely monitored by investors and therefore will move the market. The stock index fund managers will dispose of the stock that has been removed from the stock index. However. · Analyst upgrade / downgrades. Large Cap etc. an inclusion of a company stock to a stock index will generate buying interest in the stock for these stock index fund managers. the insiders may sell their stocks/stock options to cash-in their compensation benefits. do be aware that due to compensation package that comes in the form of stock or stock options. · Insider trading. one needs to be wary of the fact that quite often analysts' upgrades or downgrades happen "after" some important news about a company. CFO. · Investment Gurus / Hedge Funds trading. However. So. as the stock price will increase regardless of stock split.) .· Stock splits. the buying or selling of stocks by these insiders may herald some good or bad news about the company. . Therefore. Some attributed to the better affordability of the stock after stock split. who has first hand information about the operations and the financial status of a company. Stock split in theory. Some however believes that stock split has no real impact on the stock price (effective stock price. many analysts will likely to downgrade the company stock. Analyst upgrade and downgrade to a stock may have positive or negative impact to the stock prices. Stock Index Fund are those funds that invest in those company stocks that are included in a particular stock index (e. and analyst downgrade may not have further impact to the stock price. Therefore.g. Chairman.S. S&P 500. COO.

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