The Indian stock market is mainly regulated by the National Stock Exchange of India (NSE) and the Bombay Stock Exchange (BSE). The headquarters for both the organizations are located in Mumbai. These stock markets act as a major determinant for the condition of the Indian economy. There are a number of factors that affect the Indian stock market.
Here, you will be able to go through a detailed note of the various factors that affect the stock market of the country either positively and negatively. Before you invest anything in the stock market, it is vital to know about the factors as you can make the decision whether to go with stock investing at the moment or not. Furthermore, the stock experts present in the country are generally aware of the conditions mentioned below and they predict the returns you might get when investing on a share for a specific company.
Leading factors affecting the stock market of India
The stock market is mainly composed of investors and traders. Both the mindset of the traders and investors make the environment of a stock market different from that of gambling. On one side, the investors are concerned about getting good returns on the investment and the traders are trying to keep up the price of their shares. Here are the leading factors that affect the condition of the stock market:
Regulations of SEBI
The Securities and Exchange Board of India has imposed certain regulatory guidelines on the stock market. These guidelines are present since the stock market came into being. The guidelines of SEBI ensure that the number of participants in the stock market increases with time. A circuit breaker is also present in the market that ensures that the invested money does not get forfeited if the market faces a crash. It is actually the threshold that is set concerning the stock fluctuation in both positive and negative directions.The time period concerning the halt of the circuit breaker can be predetermined. There are mainly two benefits of the circuit breaker which helps both traders and investors to take future decisions regarding a stock. It also affects the demand-supply graph.
Price rigging is one of the leading scams related to the Indian stock market. This affects thestock market in a negative manner. Some remarkable scams that took place and became quite prominent in the Indian stock market news are the Ketan Parekh Scam and the Harshad Mehta scam. However, with the improved surveillance of SEBI, instances of price-rigging have decreased. Price rigging is done by scammers generally by circular trading and they influence the stock price of certain companies.
Monetary policy of RBI
The monetary policies of the Reserve Bank of India affect the share market India in a prominent manner. The increase or decrease of the repo rate mainly affects the prices of the shares and stocks for a company. As the leading companies act as the traders in the market, the fluctuation of the Repo rate would naturally affect the stock market. For all capital-intensive industries, the increase in the reverse repo and repo rate and can put a negative impact on the stocks while a decrease in both can lead their stocks to rise.
If an investor needs to know about the condition of the Indian stock market today, the best way for him is to check the news. So, the news published in any medium affects the Indian stock market. Different stock analysts speculate the shares of different companies. The investors generally get manipulated by this news for their next investment. Any company which is on the news can have a fluctuating price for the shares.
Sentiments of the Market
The majority of investors take the sentiments of the market seriously when investing in the shares either for the long term or a short term. Many investors actually play safe being in the crowd when it comes to investing. They tend to buy the shares of a company at cheap prices and sell them when it elevates. As a result, they can earn good profits by timely buying and selling different shares.
Announcements by trader companies
Any major announcements by the treader companies can affect the price of their stocks instantly. Majorly the announcements related to management change, split, crash or dividend play a vital role in the fluctuation of price. Regular investors are generally reluctant to buy the shares of such companies that are going through the situations mentioned above.
The stock market in India is also impacted by the political situation of the country. The graphs related to the stock market were observed to touch heights when the NDA formed the government in India along with the Prime MInistership of Narendra Modi. However, the fluctuations can persist for a longer period depending upon the level of industrial development that the political party in power is making. Government policies also play a vital role in affecting the share market of India. When demonization was imposed in India, the stock market experienced a gradual crash due to the absence of lumpsum liquid money.
Natural disasters like massive rains, storms and earthquakes largely affect the prices of the shares for the companies. This happens if a share trading company faces certain emergencies leading to depreciation of the revenue. As an investor, it will always be the best for you to check the weather forecast before investing in any share. Some trading companies might also face a situation where the demand for their services or products depreciates due to a natural disaster. In such cases, the prices of the share will elevate resulting in the investors being reluctant about investing in them.
Apart from the factors mentioned above, the share price depends largely on the fame and repute of the company. As an investor, you are more likely to find consistency in ITC share price. It is one of the top-ranking companies when it comes to the hospitality industry. The same goes for the TATA Steel share price.
Today, there are many options available for investors to invest in the shares of the leading corporate entities operating in India. If you are willing to invest in the shares of the specific companies, it will be a wise move to acquire the basic knowledge about the share market. Moreover, learning the procedures of market management is another vital thing that one must know. (Photo: MoneyControl)