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REASON BEHIND FLUCTUATION OF SHARE MARKET

Prices of share market are affected by demand-supply economics. The share market can go up and down based on a number of different factors - including consumer-confidence, worries about inflation as well as supply and demand. As an investor, it is important to understand market fluctuation and how it works. Like any other products, the prices of shares hinge on supply and demand. Prices rise when the supply of shares for purchase is not enough to meet the demand of the investors – thus they fall when fewer investors are interested in buying shares. Share prices change everyday by market-forces – by this we mean that share prices change because of supply and demand. When the demand for a certain share exceeds supply, there will be a rise in the price. If the shares of a company are listed in more than one market due to certain factors, a fall in the price in one market may lead to fall of price in other markets as well.

A price is attached to each share in a publicly traded company where the share is bought and sold on exchanges – for each share a company buys and the investor owns a piece of that company. In a large part, supply and demand dictate the per share prices. If demand for a limited number of shares outspaces the supply, then share price normally rises and if the supply is greater than demand – the share price typically falls. According to basic fact, change is constant, change can occur either to satisfy or to disappoint also. Consequences on fluctuation of share prices cannot be even escaped. In the share market the prices of shares keep fluctuating in every moment of trading hours. If a company is ready to pay 15% on its equity shares, whereas the normal expectation is only 10% of the return in industry, such share would magnetize a large number of buyers.

Again, if the rate of interest is low, the nationalized banks come with a lower rate of interest for their customers – this lower rate of interest convinces the consumers to borrow more to speculate securities. This process makes arise in price of securities. If the rate of interest is high, the banks are unable to provide credit on liberal terms. As a result, a minimum amount of money will be borrowed for the speculative purpose from the banks. This process makes a fall in the prices of securities. The ability of a company to pay a dividend is determined by the financial position of the company. More and more people would show interest in the shares of company only if the position is good. Thus, the share-prices rise up. The escalation in the share price may happen if the speculators start buying the shares in the bulk, the speculators start to sell their holding as the price reaches the top to make quick profits and the selling would pull down the price. During a time-span of depression that is characterized by a drop in price level the speculators need to make purchases to encounter their commitments to sell.  This results in the rise in the prices of security. The actions of the speculators are also meant to be focused to determine the security prices. As the speculators start purchasing in bulk with the expectation of profit, the price rises; similarly the opposite or negative actions of speculators result in a fall in the price.