Prices of shares and securities fluctuate time to time like other products prices.
Demand and supply laws are activate in this market.
Prices fluctuate here rapidly than other products prices.
Share prices are influenced by multiple factors.
Causes for the fluctuation of prices of shares and securities are stated below: Business Condition: There is a close relation between price fluctuations of shares-securities with business condition.
Good condition of business increases the Price of shares and terrible condition leads to decrease the price.
Business conditions are broadly two type's boom and depression.
In 'boom' market share prices increase and in depression share prices decrease.
Rate of Dividend: Share prices are related with the change in rate of dividend.
Investors invest their money to earn profit.
So, the change in rate of dividend influences its price.
Bank Rate: Bank rate has a special influence on price changes of shares.
Increased bank rate encourages investors to save money in bank.
As a result, investors sell their shares to liquidate money for saving purpose which increase the supply of shares in the market and prices diminish.
On the other hand, decreased bank rate encourages investors to invest money on shares which expand market-demand of shares.
Growing demand increases its price.
Inflation and Deflation: Inflation lessens the power of purchase of money.
A lot of amount of money exists in people hands during inflation.
In this time people tries to get some opportunities by investing excess money in share market.
So, demand of shares increases which increases its price.
In time of deflation, share prices decrease by the influence of fewer demands.
Monetary and Credit Policy of the Central Bank: Increase and decrease of prices of shares and securities are mostly influenced by the monetary and credit policy, lack of money is seen in the market.
Investors who already have taken credits from bank are eager to repay loans even by selling their shares.
In this situation supply of shares are increased and for excess supply than demand price decreases and market becomes 'bear' market.
Fiscal Policy of the Government: The fiscal taxing policy of the government influences share prices.
If the government increases duty and tax, prices of goods increase and sale reduce comparatively.
A reduction in sale indicates a decrease in revenue.
Decrease in revenue means decrease in rate of dividend.
If rate of dividend decreases, share price of companies will also decrease.
On the hand, if a company gets tax holiday facility, tax rebate and other benefits from the government, the company's profitability increases.
Increased profit means an increase in rate of dividend and increase in share price.
Change in the Policy of Investment Organizations: Investment organizations like banks, insurances, board of investment.
if decides to sell the shares of any particular business, then the price of shares of that company reduces.
On the other hand if the investment organizations decide to make investment in a particular organization, share price of that organization increases.
Economic Depression: Economic depression affects the share market and entire economy of the country unfavourable.
During economic depression purchasing power of people decreases at a significant rate.
At that period share prices decrease in the capital market.
Import and export policy of the government: Share prices also fluctuate depending on import and export policy.
If the government provides any special rebate, export facility on export of any particular goods, profitability of those exporting companies will probably increase.
People become more interested to purchase the shares of those exporting companies under these facilities.
This increases demands for shares and increases share prices.
On the other hand, if the mentioned facilities are withdrawn then the opposite happens.
Conduct of members: Price fluctuation also happens depending on conduct of members and rumor.
If any rumor can spread in favour of any particular company, share prices of that company will increase and vice versa.
Again if any influential member intentionally acts favour of any company or purchases shares of any particular company, then share prices of that company will increase.
Other Factors: Some other factors are also responsible for price fluctuation of shares like change in any policy of the state, change in the members of ministry, civil war, election, international incidents.
Besides for any random situation fluctuates such as sudden flood, landslide.