Top Key Factors Affect the Stock Market
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The stock market is also known as the 'Share Market' where an investor can buy and sell shares of several companies. If you're an individual you can also invest in the stock market. However, it includes a bit of risk. As you know 'No Risk, No Gain'. Similarly, you have to take the risk to gain profit in the stock market. Sometimes, all you need is a little bit of patience.
The stock market is not fixed, it's variable. That's why a company's stocks go up and down a few times. To protect yourself from suffering a huge loss you've to study the stock before investing in it. A stock market depends on various elements. In this blog, you'll gain a piece of knowledge about the factors that influence the stock market.
What is a Stock Market?
A stock market refers to the market where an individual can buy a company's shares and sell them. In other words, it allows an individual to become an investor and own the company stock. The stock market is regulated by a regulatory body. For instance, the SEC (Securities and Commission) regulates the US Stock Market, SEBI (Securities and Exchange Board of India) regulates the Indian Stock Market, and the FCA (Financial Conduct Authority) regulates the London Stock Market. You can buy short-term and long-term stock based on your preferences. Soon after the new securities are available in the primary market, you can buy them in the secondary market.
Top 6 Factors that Influence the Stock Market
1. Exchange Rates
The exchange rates are the key element that influences the stock market. The currency rates directly create an impact on the share market. If the exchange rate is positive, it can encourage investors to invest in a country that has a stronger economy. The positive exchange rate can attract more foreign investors.
Contrarily, if the currency of a particular country hardens, the price of that particular country's goods increases in another country. For instance, if the INR (Indian Rupee) value hardens, the price of Indian goods will increase in the overseas markets.
2. Government Policies
The Government policies are not the same in every country. It's different in different countries. However, it plays a major role in the stock market. When any Government introduces a new policy can create a positive or complicated situation. It depends on the policy.
If the corporate tax increases, it will impact the company's profit. As a result, the stock will fall. Meanwhile, if the corporate tax price decreases, the company's profit will increase. Correspondingly, the stock price will also increase.
3. Monetary and Regulatory Policies
The monetary policies have been implemented by the central banks of the country. For instance, the Reserve Bank of India (RBI) regulates India's monetary policies. The repo and reverse rates influence the Indian stock market. The sudden change in reverse and repo rates increases the lending rates and affects the stock market rate.
Meanwhile, the regulatory policies have been implemented by the regulatory board. For instance, the SEBI regulates the Indian Stock Market with a few rules. A sudden policy change can influence the buying and selling behavior. Later, the stock price will either increase or decrease.
4. Interest Rates
Like the exchange rates, interest rates play a major role in influencing the stock market. If the interest rate goes upward, the corporate cost can increase and vice versa. Later, it ended up affecting the stock price.
If the interest rate increases, the price of a share in the stock market can decrease. During this time, investors like to invest in bond schemes instead of stocks. Contrarily, if the interest rate decreases, the stock price will increase.
5. Inflation
Inflation is another key factor that affects the stock market. During this period, the price of goods and services increases. In addition, it affects the buying and selling behavior. If the inflation rate is high, the investment is low. Later, it also creates a negative impact on economic growth.
If inflation arises, a few companies may cut their investment and their savings value will also diminish. As a result, an investor may not afford to bear a risk in the particular company's stock.
6. Import and Export
Globalization has positively influenced the import and export of goods. As a result, a company gets the chance to sell their goods in the international market. Later, the demand for their product in the foreign market can also increase. If the supply is not up to the mark, then the stock price might diminish.
The change in government policy, monetary policy, and regulatory policy can disrupt the import and export process. Sometimes, due to inflation, a company fails to maintain a balance between imports and exports. Later, it influenced the stock price.
The Bottom Line
Nowadays, it become easier to invest in the stock market. Several mobile applications allow you to buy and sell your favorite stocks. However, the stock market is variable. There are a few factors that influence the stock market price. It includes the government, monetary, and regulatory policies. Apart from that, inflation, interest, and exchange rates also influence the stock price. The sudden change in policies and rates can create an impact on the import and export. Later, it affects stock price.
In this blog, you've acknowledged the key factors that influenced the stock market. Do you have any concerns? Do you own any stocks right now? Feel free to let us know in the comments.
Very Informative
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