What Factors Drag the Indian Stock Market Down?
When you invest in the stock market, you are taking some amount of risk. Every investor is aware of this. Irrespective of the market expert you are, uncertainties could never be predicted. Market fluctuations occur because of various cases; every time, it would not be the same cause. So, what are these causes for market fluctuations? Have you ever wondered? Let’s talk about the different causes of market fluctuations or what could bring down the prices of the stocks. Let’s see.
What Brings Down the Prices of the Stock?
These could be the possible causes for why the stock prices fall or are falling:
1. Government Policies:
Government policies have a significant impact on the economy and industry. The government must enact new policies to improve the country’s economic situation. Any new policy change has the potential to be beneficial to the economy or to tighten the economy’s grasp. As a result, any modification or adoption of a new policy by the government may impact the stock market.
2. The Global Markets:
The beginning effect of the global market begins with the opportunity to buy and sell stocks through online stock brokers. This means that what happens in one part of the country can affect the other parts too. Let’s look at this a little more in detail – suppose you buy stocks from the US, which means US-based stocks. And there has been a crash in the US stock market, but because you are investing in US stocks from India, though you are in India and not the US, you will be affected by the change in the US stock market. This is effective when we look at it from a larger perspective and not just the perspective of an individual.
3. Geopolitical Issues Around the World:
Geopolitical concerns also influence markets. Whether trade disputes between the United States and China or border problems between Pakistan and China, markets tend to respond based on the ramifications for the country as a whole. This could be any country, but a large part of the market and its movements will be considered in this case.
4. The Union Budget Will Play a Major Role:
We don’t know what else could be a factor if this isn’t one. Markets have their reactions to Finance Ministers’ speeches on the Union budget. For example, the markets have praised statements that have put money in the hands of investors, such as Dr. Manmohan Singh’s budget day speech in 1991, which resulted in a record surge in the Sensex, or P. Chidambaram’s ‘dream budget’ in 1997.
5. Inflation is One of the Biggest Causes:
When interest rates rise, banks raise lending rates, raising the borrowing cost for businesses and individuals. The increased costs will influence the company’s profit margins, which will impact the stock price. Inflation is known to be a rise in the price of goods and services over time. Inflationary pressures deter investment and slow long-term economic growth. Stock market-listed companies may postpone investments and production, resulting in negative economic growth. A decrease in the value of money may result in a decrease in the value of savings. Luxurious company stocks also tend to suffer, and no one wants to invest in them.
6. Natural Disasters Could Also Play a Part:
Natural disasters have an equal impact on people’s lives and the economy, and it has an impact on the company’s performance and people’s ability to spend money. This will result in decreased consumption, sales, and revenues, all of which will negatively impact the company’s stock performance. A strong example of this is our very COVID-19 situation.
7. The Prices of Gold and Bonds
The relationship between stock price and gold and bonds is not well understood. Stocks are typically thought to be a risky investment, whereas gold and bonds are thought to be safe havens. As a result, in a significant economic catastrophe, investors prefer to invest in secure instruments. As a result, gold and bond prices are rising while stock prices are falling.
8. The Economic Indicators are Also a Cause:
Various economic indicators impact the broader economy and, as a result, the financial market. Changes heavily influence the stock market, oil prices, and GDP. Any price shift in a country that relies on imported oil will likely impact the economy. One of the most crucial factors in the stock market is the fluctuation of oil prices. When prices rise, expenses grow, limiting buyers’ ability to invest in the market.
9. The Supply and Demand in the Market:
Another key factor contributing to the stock market’s decline is this. A small or a big change in the equilibrium of the supply and demand causes a change in the price of a stock. When there is greater demand for a stock but a short supply, the price of that stock rises. Similarly, if supply is large but demand is low, the price of a stock falls. This scenario has magnified a hundredfold when numerous companies have a large-scale disconnect between demand and supply, which can ultimately affect the entire stock market. After all, the stock market is made up of numerous different enterprises.
A company’s stock price could rise or fall due to various circumstances. After fully understanding the above elements, the investor should have a good allocation strategy in place. It will ensure that the investor makes the best investment option and earns fantastic long-term profits.
Stock market prices going down because of various reasons should not be the reason that you do not invest in them at all; you can always take informed risks – which means choosing to invest in stocks after a lot of research and using the indicators and tools, which can also play a big part in your investment journey.
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