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Reasons for fluctuations in the price of shares

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Reasons for fluctuations in the price of shares
Price of shares fluctuates due to some mentionable reasons. For getting into the reasons for the change in the price of the shares you need to focus to understand in detail. As per the fact that change is constant change can occur either to satisfy you or to disappoint you. In short, you cannot escape the consequences of the fluctuation in the price of shares. In the share market, the prices of shares keep fluctuating every moment of the trading hours. Do not you wonder about the reasons for regular fluctuations of the prices of shares? If so then let’s focus on some of the mentionable factors that influence the changes in share price.

    • Demand for the share: Sometimes the supply of share of a company raises than the demand in the stock market. The increasing demand for share is considered by many factors. Most of that is connected to the yield from the share. If a company is ready to pay 15% on its equity shares whereas the normal expectation is only 10% of the return in the industry. Such share would magnetize a large number of buyers.

    • Bank interest rate: If the rate of interest is low the nationalized banks comes with a lower rate of interest for their customers. (Bank rate is the rate at which Reserve Bank of India discounts the permitted bills that are possessed by the banks). The lower rate of interest convinces the consumers to borrow more to speculate securities. This process makes arise in the 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 fall in the price of securities.

    • Underwriting influence: The influences of the underwriters of the shares of a company can also cause changes in the price of shares. An underwriter is an individual who assures minimum subscriptions for the shares of a company.  The underwriter is bound to buy the share himself in case minimum subscription is not attained. To create a good demand for the shares underwritten by them the underwriters may start buying the shares with the help of their agents. This process creates an unnatural demand in the market that results in a higher price of the shares.

    • The financial position of the company: This is one of the important reason for fluctuation in the prices of shares. The ability of the company to pay adividend is determined by the financial position of the company. More and more people would show interest in the shares of the company only if the position is good. Thus, the share price raises up. The escalation in the share price may happen if the speculators start buying the shares in bulk. The speculators start selling their holding as the price reaches the top to make quick profits. This selling would pull down the price.

    • Appointments or resignations of directors: If a well-known and popular director of a reputed company resigns from his respectable post it would create doubts in the minds of the investors about its financial soundness. This would lead to an adverse effect on the price of the shares. Same as when the renowned director of a company along with sizable holdings passes away there is a chance of his shares to be disposed of. Such selling may drop the price of the shares of the company.

    • Speculators:  During a time span of depression that is characterized by a drop in the price level the speculators need to make purchases to encounter their commitments to sell. This results in a rise in the price of the security. The actions of the speculators are also meant to be focused to determine the security prices. As the bull start purchasing in bulk with the expectation of profit the price rises. Similarly, the actions of speculators result in a fall in the price.

    • Listing in more than one market: This is one of the crucial reasons for share price fluctuation. If the shares of a company are listed in more that one market due to certain factors a fall in the price in one market may lead to falling in the price in other markets as well.

     

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