The stock price is highly influenced by the news. Any positive or negative news results in a rise and fall in the stock price. A positive news boost investor sentiments and stock price move upward. While negative news discourages investors and stock price is likely to fall. In short stock price movement is depended on the news and multiple other factors.
Let me give you a recent example of Gitanjali Gems stock. A stock of Gitanjali Gems tumbled more than 71% in three weeks due to negative news of PNB loan default case. Another example is of recapitalization news of PSU Banks. Last year government has announced 2.11 Lakh recapitalization plan for public sector bank. Due to this news stock of SBI, PNB, BOB, and BOI have zoomed by 28-46% in short span.
From above examples, it is clear that any new announcement about stock leads to positive or negative stock price movement. The stock market investor needs to keep track of both positive and negative news. Apart from news, there are many other factors that are responsible for the up and down movement of stock price.
In this post, we are going to discuss 10 factors that can move stock price upward.
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10 Factors that can Move Stock Price Upward
- Positive Quarterly and Yearly Results
A release of quarterly and yearly result affect the stock price. A positive quarterly and yearly result with a growth in profit numbers boost the confidence of investors and hence, the price of share moves upward. Apart from that result also gives an indication about future earning potentials of the company.
- Business Expansion and new product launch
Another important factor that moves stock price upward is business expansion and new product launch. Any new announcement about the launch of a new product or new plant is likely to boost the revenue of the company. Most of the time it is taken as positively by the investors.
- Mergers and New Acquisitions
Mergers mean joining of two companies into one. It is also known as cooperate marriage. A new acquisition means a purchase or takeover of other company under existing name. Merger and Acquisitions are likely to boost revenue and earnings of the company. Merger and acquisitions both are taken positively by the investor. It leads upward stock price movement for the investors.
- Stock Buybacks
Another factor that is responsible for the positive spike in the stock price is a stock buyback. A stock buyback means repurchase of the shares. When a company announces a stock buyback, the main intention is to reduce a total number of shares from the market. This step indirectly increases the value of remaining shares and hence stock price is likely to go up.
Bonus share means additional shares that are distributed by the company to the current shareholder without any cost. It is one of the methods to reward existing shareholders.
Bonus declaration is taken as positive news by the investors. Bonus share will increase the future dividend amount. It will also increase share price.
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- Stock Split
A stock split is another factor which is responsible for upward stock price movement. In a stock split company splits that share price into different parts. For example, if a stock split is 1:5, stock splits into 5 parts. If a stock split is 1:1, stock price splits into two parts. The stock split does not affect the share capital. Stock splits make the company more affordable. Thus stock price is likely to go up.
- Higher Dividend Distribution
If a company is distributing dividend amount that means a company is earning money. A higher dividend distribution announcement means shareholders will get higher dividend amount per share. The demand for this type of share is likely to increase and hence stock price will go up. However, in higher dividend case share price increase may take place till ex-dividend date.
- Addition to Index
A stock inclusion in the index is another factor where the share price is likely to increase. Once a share is announced to added in Sensex or nifty, it is positive news. Apart from that index fund have to purchase the share of a company. An increase in demand may cause an increase in share price.
- Exchange Rates
The exchange rate is another important factor to look for. Dollar exchange rate with rupee matters a lot to the company doing business outside India. This factor is important mostly for IT company or exporter and importers.
In case dollar price increases importers need to pay more money for buying foreign goods and hence share price is likely to fall. On the other hand, if export of goods is involved it benefits company and share price is likely to increase.
- Political Stability
A stability in political condition also plays a vital role when it comes to a share price. It is generally observed that stock market performs well in a good political stability.
Apart from that few other factors that affect stock price is a change in the top management, monetary policy change, union budget announcement, tax policy change, global issues, natural disaster, FII investment, and spin-offs.
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Over to you
A stock market investment is a risky affair. You should have proper knowledge before investing your money in the stock market.
The factors mentioned above gives an indication about rise and fall in the stock price, but in order to use these factors effectively, you need to know about the relation of stock price and these factors.
Another point is predicting sentiments of the stock market investors. Sometimes it is seen that even positive news cannot boost the stock price.
You need to worry about these factors if you are short term investor or trader. If you are a long-term investor and investing based on fundamentals you need not worry about any short-term share price fluctuations.
In the end, I would like to share famous saying of stock market guru Peter Lynch – “I think you have to learn that there’s a company behind every stock and that there’s only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.”