Understanding Stock Market Trends: What Drives Changes?

In your youth, you believe you have time and in your old age, you may have regrets. Same is with investments, beginning early gives you more time. A step-ladder approach can always help understand investing and types of vehicles through which investments can be made. Investing needs to be a strategy game and not a guesstimate game. Assets that you invest in form a part of your portfolio. 

The portfolio consists of equities from the stock market; debt investments through convertible and non-convertible debentures, bonds, and other instruments; fixed deposits, government securities, PPF, PF, NPS, gold, and many more. Out of these, the one that is linked to market sentiments and is volatile is the stock market investments. 

Stock market investments happen through equity via trading or via investments in IPOs, and FPOs. The price that you pay for a share is determined by the market forces, hence, turbulence in the markets affects the price. When investors see a positive moment in the environment around them, it is an indicative bullrun, and when it is negative, it is a bear market. While these are very crude and just scratch the surface, the stock market is influenced by various forces that determine the prices of the shares of companies listed on the exchange. 

Let’s understand what moves the stock markets: 

  1. Public sentiments: 

Most of us do like to think that we are driven by data and so are our decisions. However, this may not be the case all the time. Sometimes, a piece of news which has been an unconfirmed rumour still gets a lot of attention, and markets start moving sideways. 

  1. Policy changes: 

A certain policy change may impact the way certain industries or certain stocks perform in an industry. One of the recent examples of this can be when RBI flagged the personal loan disbursal by PayTM, and their stock started plummeting. 

  1. Change in government: 

Even an administrative change of a major kind impacts the way markets perform. In this case, if people have less faith in the contestants beating incumbents, markets may perform positively or negatively depending on the nature of the change. 

  1. Geo-politics:

The world is now a global economy. Instability or a big occurrence in one region or a country can have a seismic impact across other regions. For eg. When the Israel-Hamas conflict began, the global supply chains were disrupted. Similarly, during the Russia and Ukraine conflict. And the major one was the Covid-19 pandemic. 

  1. Corporate filings: 

In the global economy, a company may exist across regions. Hence, a performance filing in one region can impact the overall position of the company across various exchanges. 

There are many such scenarios when the stock market performance impacts the stability across the globe. As an investor, how do you deal with such a scenario? Well, investing in fundamentally strong companies, sectors that are not cyclical, and knowing when to mitigate risk can help you save your earnings from eroding. You can follow the SGX Nifty to get the pulse of the market before it actually begins and think calmly rather than panicking at the last moment. 

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