General, Investment, Mutual Funds, Stock Market

5 Reason for fluctuation in Share Prices

5-reason-for-fluctuation-in-share-prices

Stock prices are known for fluctuating. When the market opens in the morning, the value of a company’s share continues to change until the market closes for the day. The changes in the share prices of the company can be accounted for multiple reasons. The causes often work in synchronisation and cause the fluctuation in the rates. Individuals, groups and especially brokers need to pay very close attention to the changing factors before buying or selling shares as to assure that they are not at a loss and make informed decisions. Some of the factors that affect the fluctuation of share prices are:

The Financial Position of the Company in Question:

The share prices can change depending on the company’s standing, financially. The sound financial status allows the public to show more interest in the company’s shares and possibly buy more shares. This would increase the share price, causing a fluctuation. Some people may even buy the shares of a company speculating their financial position, surging the share price and then sell them, creating a decline in the company’s share value.

Change in the Political Situation:

It has now become common knowledge that different political parties and governments show a different inclination towards different companies. The change in the political situations can make the share prices fluctuate as well. Specific political actions such as war, new tax reforms, changes in the government policy can lead to a fall in the share prices.

Status of the Company Officials:

The image that a company sets in front of its shareholders and the public, in general, is very crucial. Hence, the resignation of a sought-after CEO, director or any other official may create a fluctuation in the share prices of the company. Departures may develop doubts and hesitations about the inner workings of the company, and by relation, it is financial stability.

Changes in the Interest Rates:

When banks offer low-interest loan rates, the spectators are generally inclined towards borrowing more money in order to trade it later actively. By doing so, the share market gets a higher influx of funds, leading to a rise in the share prices. However, during high interest on loan rates, less money is borrowed, and hence, less money reaches the stock market and share prices fall.

The difference in the Approach of the Investors:

The clash between the way two investors would approach a share also plays a prominent role in a company’s share prices. Different people utilize different strategies. Some people may be fearful of a company’s fate, and they sell their share and the demand decreases. Which causes the share prices to fall, and some might want to risk the tides, and that increases the share prices. Thus, the individual approach to stock market also affects the fluctuation of share prices.

Therefore, how the tide of share prices might change remains to be influenced by the changing winds of many different factors. All these various components come together to create the circumstances that fluctuate the share prices.

 

 

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CA Rachit Jain

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