Share price understanding how does prices increase or decrease with examples

  1. Stock Markets Basic
    1. Invest:3 benefits of investing for your future
    2. Types of Investment Diversification asset classes
    3. What is the share market? What Does It Do and How Does It Work with examples
    4. SEBI What is Securities and Exchange Board of India
    5. Stock Broker Financial Intermediaries or Market Intermediaries role in share market
    6. Depository and types of Depository Participants in India
    7. ICCL, NSE Clearing Limited and Bank’s role as Financial intermediary
    8. Angel Investors What are their roles with examples
    9. Venture Capitalist Who Are They and What Do They Do
    10. CAPEX Understanding Capital Expenditure with examples
    11. Private Equity Explained Understanding PE With Examples
    12. Initial Public Offering (IPO): What It Is and How It Works
    13. Launch IPO Why Do Companies Go Public
    14. IPO process how Initial Public Offering works in India
    15. What is IPO Key Terms Related to Initial Public Offering
    16. What is the share market?
    17. Share price understanding how does prices increase or decrease with examples
    18. Share trading: How Does It Work? with examples
    19. Types of traders in share market
    20. Market Index How Indexing Works, Types, and Examples in share market
    21. Share market indices importance and key terms
    22. Index construction methodology
    23. Share market terminology
    24. Share market terminology for beginners
    25. How to Trade Shares for Beginners
    26. Clearing and settlement process in the Indian Share market
    27. Stock selling learn What happens when you sell a stock
    28. Corporate actions in share market and impact on prices
    29. Bonus Issue of Shares Explained and How They Work
    30. Stock Split and Buyback of Shares What you need to know
    31. Monetary Policy by RBI Repo Rate, reverse repo rate, Cash reserve
    32. Inflation and IIP explained with examples
    33. Purchasing Managers Index, Budget, Corporate Earnings Announcement and Non-Financial events
    34. Stock market basics for beginners
    35. Offer for Sale and Follow-on Public Offer explained with examples
    36. Rights Issue and its relevance to shareholders explained with examples
Marketopedia / Stock Markets Basic / Share price understanding how does prices increase or decrease with examples

Stock prices rise and fall depending on a variety of factors. Changes in the economy, investor sentiment, political news, actions taken by organizations and individuals, as well as events like natural disasters, can all contribute to changes in stock prices.

Let us take the example of Reliance Industries to figure out how stocks move. Assume that you are an individual monitoring Infosys in the market.

At 09:30 AM Reliance Industries was trading at Rs.3000 per share, and the management released a press statement to announce their new senior management personnel appointment and also clean chit from the regulator. They are certain that this individual will bring many positive changes to the organisation.

Two questions must be asked when making decisions: 

  1. What will be the market’s response to this news regarding Infosys’ stock price?
  2. When it comes to Reliance Industries, what type of trade would you consider taking? Would it be a purchase or a sale?

The first answer is rather straightforward; Infosys has seen a positive shift, particularly due to its resolution of a leadership problem. This, in turn, leads to market participants’ enthusiasm to buy the stock, no matter what rate, which will consequently result in an increase in the stock price.

SI No. Time Last Traded Places What price the seller wantsWhat does the buyer do?New Last Trade Price
109:3030003004Buys 3004
209:3130033007Buys 3007
309:3330043009Buys 3009
409:35 30103013 Buys 3013 

The buyer is prepared to pay whatever prices the seller demands; this is known as a bullish market. In such a situation, values are generally climbing.

As evidenced, the stock price rose 13 Rupees within 5 minutes. As is common, prices tend to climb when news is either promising or expected to be so.

In this instance, the stock price is on the rise because the leadership problems have been resolved, and there is anticipation that the new CEO will take the company to unprecedented levels of success.

The response to the second query is simple, but you buy Infosys shares as there is positive news regarding it.

Later that day, the company announces that a part of their refinery caught fire.

Let us suppose Reliance Industries is trading at 3030 by 12:30 PM. Now, here are some queries to consider…

  1. What influence does this new information have on Reliance Industries?
  2. What would be the effect of beginning a new trade with this knowledge?
  3. What will be the impact of other refinery stocks in the market?

The above questions are easily answered; however, to gain a more thorough understanding of the impact of the announcement, let us delve into it further.

Let us now see if we can answer the questions posed above.

Reliance Industries is an Indian conglomerate company headquartered in Mumbai. The organization was founded by Dhirubhai Ambani in 1966. It operates in several different sectors, including refinery, telecommunications and retail. So with this announcement there will be a decrease in their output and hurting their revenues.

An investor who receives new information at 3030 would be wise to initiate a sell on Reliance Industries.

It’s clear that news and events have an impact on market participants, who express their responses correspondingly through stock prices. This is what drives the stocks’ movements.

One might ponder what will happen to a corporation’s share value if no announcements are made. Could the stock cost continue still and not fluctuate? The answer is not necessarily straightforward; it largely depends on the entity in question.

In summary, the fluctuations in price can be attributed to the anticipation of news or occurrences that affect the company, sector or overall economy. For example, following Narendra Modi’s appointment as Indian Prime Minister, it was generally seen as a positive development which had an impact on the share market.

In some cases, no news may be present, yet the price could still fluctuate based on demand and supply.