1.12Why do stock prices increase and decrease?
Share prices move because of demand and supply. When more people want to buy than sell, the price rises. When more want to sell than buy, the price falls.
People buy or sell based on what they expect about the company’s future. Things that change those expectations include:
- Company results: higher or lower profits.
- News: new contracts, management changes, scandals.
- Economy: interest rates, inflation, GDP growth.
- Global events: wars, oil prices, US markets.
- Sentiment: fear and greed, sometimes with no new facts at all.
Mangoes in April are expensive because few are available and everyone wants them. In June there are lakhs of mangoes, and the price drops. Nothing about a single mango changed; demand and supply did.
When a company like Infosys announces quarterly results better than expected, many investors rush to buy, and the price may jump that day. If results disappoint, sellers outnumber buyers and the price falls.
Buyers compete and offer higher prices, so the price goes up ↑
Sellers compete and accept lower prices, so the price goes down ↓
- In the short term, prices can move for no clear reason.
- Reacting emotionally to every move usually loses money.
Read company news before reacting to price moves. MojoStox shows stock-specific news with a sentiment tag on every stock page.
- Prices move with demand and supply.
- Expectations about future profits drive demand.
- News, economy and emotions all matter.
- Short-term moves can be random.
Q1. What happens to price when sellers outnumber buyers?Show answer
It falls.
Q2. Give two things that can change a stock’s demand.Show answer
Results, company news, interest rates, global events, market sentiment.
Q3. Can a price move even when there is no news?Show answer
Yes, because of sentiment and short-term trading.