Four Principle Factors Affecting Stock Prices

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Information about Four Principle Factors Affecting Stock Prices

Published on June 6, 2013

Author: KotakSecurities



Ever wondered what makes stock prices move the way they do? Take a look at the four factors that have a major impact on stock prices.

Demystifying Stocks Four Principle Factors Affecting Stock Prices

Are you new to the share market? • Ever wondered what makes stock prices move the way they do, sometimes even to the extent of displaying extreme fluctuations? • Here are four factors that have a major impact on stock prices.

The Stock’s Demand and Supply • This is probably the most important factor that impacts stock prices. • If you have an online trading account, you get to look at the volume of shares bought or sold during the respective trading sessions. • When you have more people buying a particular commodity and if there is a general scarcity, it automatically has an impact on the price of the commodity. • Same thing happens when there are more number of people buying the share versus the ones who are selling the stock. • The reverse happens when more people are selling the stock as against the ones who are buying it.

The Company’s Market Capitalization • People generally make the mistake of determining the worth of the company by referring to its share price which is not entirely correct. • The right way to determine a company’s worth is to understand its market capitalization which will help one determine the true worth of the company. • The market capitalization of a company is a key indicator in determining its stock price.

The Stock’s Earnings Per Share • Earnings per share simply means the profit a company has made per share. • The EPS becomes a fairly good indicator to gauge the company’s performance as well as its present financial status. • A higher earnings per share is a positive signal that leads to increased buying of the company’s shares which again has an positive rub off on the company’s share prices. • The best time to look up EPS related data is when companies release their quarterly reports.

Market/Company News • Mere speculation via news and media reports might cause prices to plunge or even skyrocket. • Company or industry news that has the potential to either go in favour or against the company can have a major impact on stock prices. • It is, however, advisable to stay clear of speculative news the objective of which is to either break the prices or inflate it for short term gains. • Access to real time news and information on market trends & access to super quick online trading has vastly changed the dynamics of stock market investment. • Every bit of information needs to be carefully scrutinized before one chooses to act on the same.

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Disclaimer: Kotak Securities Limited, Registered Address: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E) Mumbai 400 051. Correspondence Address: 6th Floor, Kotak Infinity, Building No. 21, Infinity Park, Off Western Express Highway, General AK Vaidya Marg, Malad (East), Mumbai 400097. Tel no: 66056825. SEBI Registration Numbers: NSE INB/INF/INE 230808130, BSE INB 010808153 / INF 011133230, OTC INB 200808136, MCX-SX INE 260808130/ INB 260808135/INF 260808135 , NSDL IN-DPNSDL-23-97, CDSL IN-DP-CDSL-158-2001, AMFI ARN 0164. Compliance Officer - Mr. Sandeep Chordia. Tel. No: 022 6605 6825. Email id: In case you require any clarification or have any concern, kindly write to us at below email ids: • For Trading Account related queries: • For Demat Account related queries: • • Alternatively, you may feel free to contact our customer service desk at our toll free numbers 18002099191 or 1800222299. You may also call at 30305757 by using your city STD code as a prefix. In case you wish to escalate your concern / query, please write to us at and if you feel you are still unheard, write to our customer service HOD at

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