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5 common causes of stock price fluctuations

Publish Date: June 11, 2019

By: Sandhya Kannan, Head – Content

Price fluctuations are common in the stock market. But they may create confusion among investors and traders.

How do you cope with fluctuating prices in the Indian stock market? It helps to start by understanding why markets move the way they do. Here’s a roadmap to the reasons stock prices can surge or come crashing down.

Common reasons behind stock price fluctuations

  1. 1. Internal aspects of a company: The stock prices of a company depend on its well-being. A company that’s faring well has a higher stock value and vice versa. Stock prices may change if a company makes huge profits or undergoes a takeover. A scam or bankruptcy will negatively affect its stock. Internal changes are also likely to change its share prices.

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  2. 2. Reserve Bank of India (RBI) policies: The RBI updates its policies every few months. Stock prices may fluctuate because of changes in such policies. Alterations in the repo and reverse repo rates generally affect the Indian stock market.

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  3. 3. Value of Indian currency: Changes in the Indian currency exchange rate is another reason behind stock market fluctuations. When the rupee is strong, some companies—mainly those dealing with exports—benefit. Their stock prices shoot up. The opposite happens with the firms that work on imports. Changes in the exchange rate result in market volatility, which leads to price fluctuations.

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  4. 4. Political scenario: When a significant political event takes place, the stock market may witness major fluctuations. The market stays stable when the political scenario is calm. Recession, oil prices, war, and the health of the global economy, among other things, also influence stock prices.

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  5. 5. Natural disasters: Natural disasters like an earthquake or floods bring volatility to the stock market. This mainly happens because such events lead to depleted production. The companies suffer, and their share prices plummet.

    6. Related : How to deal with a market crash

Summing up

Stock market fluctuations are cyclical. It helps if you remain updated on the market news. Then you are well-placed to invest your hard-earned money in stocks. Open an account with Kotak Securities to stay ahead of the curve when it comes to trading activities.

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