Which are the factors that influence the price of a stock?

Broadly there are two factors: (1) stock specific and (2) market specific. The stock-specific factor is related to people’s  expectations about the company, its future earnings capacity, financial health and management, level of  technology and  marketing skills.

The market specific factor is influenced by the investor’s sentiment towards the stock market as a whole. This factor depends  on the environment rather than the performance of any particular company. Events favourable to an economy, political or  regulatory environment like high economic growth, friendly budget, stable government etc. can fuel euphoria in the investors,  resulting in a boom in the market. On the other hand, unfavourable events like war, economic crisis, communal riots, minority  government etc. depress the market irrespective of certain companies performing well. However, the effect of market-specific  factor is generally short-term. Despite ups and  downs, price of a stock in the long run gets stabilized based on the stock-  specific factors. Therefore, a prudent advice to all investors is to analyse and invest and not speculate in shares.




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