Cues from the global markets and crucial macroeconomic data points affect how the stock market opens in the coming week. Understanding the factors that decide how the market will move in the coming week equips a retail investor with a clear picture of how he should prepare for the stock action on the coming Monday. It is convenient to conduct extensive research in the stock market and stay updated with the latest market-related news when you open demat account with an advanced stockbroker.
Let us examine the top 10 factors that decide the stock action for the coming week to help you stay ahead of the market.
10 Factors that Decide the Stock Action on Monday
- Demand and supply: The increase or decrease in a stock’s price is primarily determined by its demand and supply in the market. A company whose stocks are in demand because of its financial position will witness a rise in its stock price because the demand for its stocks will exceed the supply. On the other hand, stocks that are not in demand have a higher supply than their demand and their price is expected to fall.
- Interest rates: The apex bank of the country, the Reserve Bank of India decides the interest rates at which loans are made available to companies. During times when the interest rates are low, companies can increase their borrowing and gain better profits. It results in an increase in the company’s stock prices. When the interest rate is high, companies would have lesser profits because they would have to pay more towards their loans. You can open a demat account with low demat account charges and invest in the stocks of growing companies.
- Political factors: Political factors, such as a civil war, public outrage against the government, budget announcements, and election results, have a significant impact on the stock market. Additionally, the government’s policies regarding the country’s economy also impact the stock market indices. Political turmoils and riots affect the stock market negatively.
- Natural calamities: Natural calamities and pandemics can hit stock prices negatively. Natural calamities such as floods, earthquakes, etc., damage property, finances, and assets, leading to a fall in stock prices. The Sensex plummeted by nearly 4000 points in a single day when the lockdown was enforced during the first phase of the coronavirus pandemic.
- Inflation: Inflation has a direct impact on a retail investor’s finances. When inflation is high, an individual has a reduced capacity to invest and spend.
- Company-related factors: Anything that happens to a publicly-listed company is bound to affect its share prices. A market leader with a competitive advantage has investors’ and shareholders’ confidence. Most investors want to buy shares of such a company. A company that is constantly facing losses, product failure, and mounting debts loses the investors’ interest and witnesses a fall in its share prices.
- Investor sentiment: The stock market’s performance is affected by the way investors are putting money into it. If the investors are aggressive and ready to take higher risks, it shows a positive investor sentiment and takes the market upwards. If investors exhibit a subdued sentiment and are low risk-bearing, the market will go down.
- Current events: News not directly related to the stock market can still affect the market’s movement. A communal riot or the demise of a public figure can bring down the market for a short while.
- Exchange rates: The exchange rate of the Indian Rupee to other global curries, like the US Dollar and Euro, also affect the stock market. When the Indian Rupee is strong, it shows positively in the stock market.
- Substitutes: The returns on alternative investment options, like fixed deposit schemes and public provident funds, affect investors’ interest in the stock market. When alternative asset classes offer high and stable returns, investors diversify their investments from the stock market to include such financial instruments.
By keeping a check of the above factors, one can make confident predictions of the stock market action and prepare himself better for next week’s market opening. You should have to learn about the Indian stock market for easy investment. If you want to invest your money in the share market, you should start the analysis of the share market.