What Factors Affect Indian Stock Market?

Economy’s health has many indicators, and the share market is one of them. Any up or down in the economy influences the share market like slowness in the economy. There are many economic factors which bring a notable change in the evaluation of stocks. Among them, inflation or deflation, changes in interest rates, happenings in global markets, and confidence and expectations are the notable ones.

Indian share market

Here we see how these four factors affect the share market.

  1. Inflation

In a particular period of time, any rise in the services and average price of goods in the economy is defined as inflation. Share market affected by any rise and fall in the inflation. In high inflation, it takes them many months to pass on higher input cost to consumers. Impact of inflation on the economy and stock markets is different, so it confuses the investor. Inflation affects their savings, which tend to hold less cash. By holding less cash, it tends them to invest less in the stock market. Share market is impacted by the influenced interest rate policy also. The rise in prices is inflation but when the prices continuously go up it becomes trouble. The high rates tend to bring down demand and reduce overall sending.

Must Read: How to make money in share market without investment?

  1. Interest rates

Share market is affected by the change in interest rates. If the key policy rates increase it means that investors will not be able to borrow money as they were borrowing earlier because borrowing becomes expensive. For compensation, the company starts cutting their expenses and laying off workers. This all adds up to cause a dive in share markets. When the repo rate goes up, it leads to higher loan repayment cost. This rising cost reduces the net profit, which can be seen in the share market. Lower interest rates attract more investors and tend to the economic growth.

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  1. Global markets

Share market is affected in a number of ways by the global economic trends. In the time of global recession, companies are incapable of selling as many goods overseas as they used to. This affects the revenue and by this share market is affected. If overseas markets begin to fail or observe a sharp dive, then it affects the share market.

Must Read: How to deal with the stock market’s ups and downs?

  1. Confidence and expectations

The mood of the investor is a key factor. According to the news they buy or sell the shares. Share markets can start to rise in the depth of the recession. Share market is totally dependent on the investors, they can change the worst face of the market and share market can rally.

Must Read: How to control investment loss in share market?


Share market is affected by many factors but the above four are some main factors which we discussed. In the share market, many points are considerable, which fluctuates due to the economy. The investors can change the worse part of the share market by investing in it.

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How is the stock price of a company decided?

People are so confused with stock prices and the stock market. Every company has its own value and it is reflected in its stock price. There is a real business behind these complex products and these stock prices. First of all, it is important to know about face value and the trading price.

stock price

Face value

When there is no change in the price of business and it remains the same. For example, a company has 1000 shares @ Rs 5 a share. If the company increases the face value of its share to Rs 10 then the no. of shares reduces to 500 only. In the above procedure, the price of business remains the same. Face value can only be changed by the company. Whenever a company changes its face value, it has the same effect on trading price because of the circulation changes.

Trading price

If a company is listed on an exchange then its share price is determined by the supply and demand of the share. If more people are buying the share then the price goes up until it finds equilibrium. If more people are selling the share, the price of share falls. The trading price of any share is directly proportional to the profit and maturity of the company.

Must Read: How to Choose Companies to Invest In the Stock Market?

What happens to the listed shares?

An investor pays for the share that are the future returns a company makes. Company’s future plans and current business is subjective to its future returns. While the overall industry and economic situation play the main role in determining the share price.

How much return will you get?

Almost complete market research is based on how much money a business will make in the future.

Must Read: How much money do you need to invest in stocks market?

Two main methods for price estimation:

  1. Price-earnings method– It is the ratio between the current market price and trailing 12 months EPS (Earnings Per Share). This ratio shows how much will market pay today.
  2. Cash flow method- It is a popular method for companies that do not depend on much debt.

Calculation of present value

Present value= FCF/ (1+R) n

R= Discount rate

A discount rate is defined as the lowest rate of return from the investment. The rate which bank fixed deposit demands.

N= Number of years

Must Read: Share market investment tips for early-stage investors

In a determination of stock price, 2 factors play an important role.

  1. Forecasting of future returns

Future is uncertain and many opinions and predictions can be true. This creates different growth track for the company and people pays a different price for the same stock. This changes the company’s stock constantly.

  1. Manipulation

A business is not run by morally pure or most ethically people. There are corrupt promoters, news breakers, insiders, operators and so on. Many sellers and buyers take the price of a share to a new level where it makes no sense.


Many factors are responsible for a stock’s price. Stock price depends on the company’s business, how it is going and other factors. The demand and supply of the stock are also responsible for the stock’s price, how often investors are buying or selling the stocks etc. Here we have discussed many facts that are responsible for the stock’s price.

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Which one is better BSE or NSE?

The leading stock exchanges in India are BSE and NSE. You have to understand the difference between these two if you are planning to invest in the Indian stock market. These two are medium of exchanges to trade.

BSE or NSE Stock Exchanges

What is BSE?

BSE (Bombay Stock Exchange) established in 1875 by Premchand Roychand and oldest stock exchange in India. It has approx 6000 listed stocks and capitalization of $2.3 trillion. BOLT (BSE Online Trading System) was started in 1995 and had a capacity of 8 million orders per day. BSE is the world’s 10th largest stock exchange. The association of person is changed into a separate legal entity which is known as Bombay Stock Exchange.

What is NSE?

NSE (National Stock Exchange) founded in 1992, and it is the first electronic stock exchange in India. In 1994, it launched electronic screen-based trading.

In NSE you can do trading in the following-

  • Shares
  • Retail debt market
  • Futures and options
  • Wholesale debt market
  • Mutual funds currency futures

Difference between BSE and NSE

The trading volume of individual stocks in BSE is much lower than NSE. For intraday trading, NSE is a better choice. For high-risk online transactions, NSE has better software. BSE is for an investor who is more conservative.

The benchmark index for BSE is Sensex and for NSE it is Nifty. In BSE, Sensex consists of 30 companies while in NSE; nifty consists of 50 stocks from 22 sectors of the economy. NSE has its network in over 2000 cities while BSE has only in 417 cities.

In NSE the volume of shares is higher than BSE, which means NSE is a better option in exchanges. But some shares are not available on NSE, so you have only one option BSE for that. Stocks like Spice Jet and Claris Lifesciences are not available in NSE. There is no confirmation for, where you get a better price for the stock. You have to compare the price before buying or selling it.

For investing in a stock exchange, it totally depends on the choice of an investor where one is getting a better option. BSE started an association of persons in 1875, which was recognized as a stock exchange in 1957. NSE established in 1992 as a tax paying company, and in 1993 it was accredited as a stock exchange.


In terms of selling large quantities, you can sell them on the NSE because it has huge volumes and maybe you get a better price. Shares which are not very liquid NSE is especially for that. Both stock exchanges are recognized by the Securities and Exchange Board of India (SEBI). Otherwise, there is no major difference between BSE and NSE.

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Stock Market Tips and Tricks For Beginners

Everyone is looking for an easy and quick way to be rich. Searching for quick ways for stock trading we have to see the powerful tools which are available to us. For earning money fast you should pay lots of attention in many factors during stock trading.


Here are some factors for an investor to be followed.

  1. Choose strong companies

Before investing choose some strong companies, which are able to stand in market fluctuations. These companies offer greater liquidity and better returns in a long term for the investor. Strong companies are more trustworthy; if you are investing money for a good return you have to research the market before invest.

  1. Set long term goals

When you are investing in the stock market, you should have more patience. Long term goals are quite profitable; don’t see the small market fluctuations. Before investing know your goals for which purpose you need that money, according to that hold your stock which is also known as positional trading. To know how much money you need for the future, you can use the free financial calculator available on the internet.

  1. Control your emotions

The main obstacle to the stock market profit is an inability to control your emotions by which one can’t make logical decisions. ‘Bear’ is known as a person who feels negative for the market, while the ‘Bull’ is the positive counterpart. In the stock market, some short term movements are driven by speculations, rumors, emotions, and hopes. In stock market, thoughts like stock price performed as expected so should I sell the stock or hold for another better price are common. So it is mandatory to control your emotion.

  1. Understand your risk tolerance

Risk tolerance is positively influenced by income, education and wealth. It is negatively influenced by age, risk tolerance decreases as one gets older. Especially in investing, the idea of perception is important. As you get more knowledge about investments, you will take more risk from the beginning. Always make investments which don’t make you anxious; so by a cool mind, one can concentrate more in the market.

  1. Handle basics first

Before making the investment, take enough time to learn the basics of the stock market. Only a few times the stock moves in the same direction, so be aware of that.

Risk tolerance and knowledge are linked. As Warren Buffett said, “Risk comes from not knowing what you are doing.”

Before investing you should be familiar with these areas:

  • Financial metrics and definitions
  • Stock market order types
  • A popular method of stock selection and timing
  • Different types of investment accounts

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What is positional trading in stock trading?

Positional trading is a form of investing where investors hold their positions for a long term with the expectation which will be profitable. In stock trading, only a few investors are succeeding because some are not consistent with one strategy. In the stock trading consistency is the key to gain a good profit.

positional trading

First of all, you will understand what is positional trading. In this kind of trading, a trader has to hold the stock for a certain period of time like days, months or years. This trading is much more like long term investment where a trader has to remain invested till their expectation turn into real profits.

In positional trading, the positions are usually based on long term investment or macroeconomic factors. These traders operate in every market like ETFs, stocks, Forex, futures etc.

Earlier trading was just simple like buying and selling stocks but now it is different. The technical analysts observe the movements in the past price and by which they predict the future price of stocks, just by checking the average you can understand the market trend for stock. Before moving further you should have a proper understanding of trends which is very essential.

Positional trading Indicators and their importance

These indicators analyse the market, whether it is moving up-down and how far a price swing.

Relative Strength Indicator (RSI):  This indicator compares the recent gains and losses for a specific period of time by which you can know the change of price movements. This indicator determines the proper time for profit booking.

For positional trading, traders should remain constant with one mindset. They should not be confused in many trading experts’ advice because doing this they lose their consistency, which is not good in this trading.

In this trading, you have to choose a good trading indicator by which you can gain a good profit. Before choosing it, you have to know how your indicator works, what kind of calculations does it make.

Apart from RSI, many other indicators are also available like channel or bands, moving average. A mean average indicator is used to see overextended markets for mean reversion and channels are used to see the rhythm of the market that is it breaking or not.

In a time tested strategy the chances of gathering profit increases phenomenally. In positional trading, you have to be in a long term perspective and you have to ignore the short term market uncertainty and should have a lot of patience. Traders are less disturbed with short term fluctuations unless impacts big difference in stock.

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