In India, the stock market is controlled/governed by the governing body Securities and Exchange Board of India (SEBI).
Before 1988 stock market in India was continued to be regulated directly by the government of India, later in 1992 the government of India constituted SEBI (Securities and Exchange Board of India) to act as the independent regulator of the stock market.
Who Controls The Stock Market Prices?
Buyers and sellers are important players in this Stock Market for settling the price, let me explain this with an example:
Example: So imagine that there is a cricket match the one who wins will get the cup, think of the same situation between the buyers and sellers the one who wins will control the price.
Case 1: Where Buyers Control The Price
Buyers control the price when the buyers are greater than sellers this means that buyers are desperate to buy their part of shares or whole, in this case buyers overtake sellers and hence this would give the control in the hands of buyers.
Now think in case you are the buyer, would you want to buy a share at a cheaper price or a costlier price? The obvious answer would be to buy at a cheaper price.
The price of the share starts falling when there is more supply(when sellers are selling more shares to book their profits or to go short in order to make money).
Case 2: Where Sellers Control The Price
Sellers control the price when sellers are greater than buyers This means that sellers are desperate to sell their shares to book profits or to short if they feel that current price is overpriced and expensive at this time when sellers are greater than buyers then sellers will easily overtake the buyers now the game is in the hands of sellers and hence this would give the control in the hands of sellers.
Now again think in case you are the seller, what would you do? Would you necessarily want to sell the shares at a higher price or a lower price? Won’t you sell? When the price is higher and expensive.
But let us discuss what makes the buyers demand more and sellers to supply more?
This is something called the market sentiment, the market is influenced by buyers and sellers, who are human beings with sentiments like fear and excitement.
These sentiments are overseen by multiple factors that are complicated and unpredictable. Hence, it is very difficult to expect the exact reaction on the stock prices and the market as a whole.
a) Fear: Fear will activate the sellers and there will be unnecessary selling of shares which drags the markets down, people may feel that the market may fall and start selling the shares in order to book their profits in panic. This may be due to fake news, change in the board of directors, adverse corporate actions, fraud, etc.
b) Excitement: Excitement will activate the buyers and there will be excessive buying of shares and this pushes the markets up.
People may buy shares based on anticipation or rumor, these may be changing political scenarios, changing monsoons, moods of foreign institutional investors, and domestic institutional investors, global leader’s decisions (wars), etc.
There will be plenty of national and international news prevailing in the market, which may affect the sentiments and emotions of human beings and thus, this effect will lead to price fluctuations.
Related : How Stock Price Is Influenced When It Enters The Nifty 50?
Originally published at https://finrick.com.
