Why share market down today? What leads to Sensex or NIFTY going up or down on a given day? Well here is a simple straightforward explanation.
First of all, if you are wondering can share market be predicted? The answer lies in the fact that it is a herculean task. Even seasoned traders and learned analysts can’t accomplish this. But there are certain factors that can be projected as the reasons behind the share market going down.
- Sudden change in geopolitical ethos or events is one of the reasons that can lead to the share market going down. A simple example of these is sudden wars or conflicts, or pandemics such as the covid-19.
- Another situation in which share markets register a fall is when there’s a market correction. This usually is a temporary phase of market stabilization and does not lead to permanent losses in the capital as the market recovers after a fall period almost all the time.
- The rate of inflation is one such factor that has an effect on share market trends. It can move the market in either of the two directions.
- The principle of supply and demand is applicable in the case of the share market too. When demand is more than more is the number of buyers, the bid goes up, taking the prices to higher rates. And in case of demand being lower, the number of sellers will be more than buyers therefore the prices go downwards.
- Profit booking is another example of the market moving in a downward trend. When the majority of investors/traders in the market liquidate their holdings for the profits that they generated, it is called profit booking. This causes a lot of individuals to sell their holdings and therefore the market prices go down.
These are some common factors that could be the reasons why the share market is down today. However, these reasons should not be taken as the only possible reasons for a down-trending market.
Every moment of uncertainty in the market is reflected in the behaviors of investors and traders. Therefore their actions are one of the key factors that drive the stock market or the stock prices. Consider the example of the 2008 market crash.
Often 2008 crash is associated with “bubble” bursting, as one of the fundamental reasons. But what is this bubble? Whenever in the securities market the stocks shoot up without the support of strong fundamentals or intrinsic worth, then such a market is under speculative demand, ie, stocks are overpriced.
This creates a bubble, which has a shape but no volume, or intrinsic strength, and eventually bursts. Now sellers respond to this bursting by indulging in quick and dramatic selling of securities and since there’s a dearth of buyers, hence the market takes a big fall. Hence, the crisis just like the one in 2008 occur.
If you have any other doubts related to the share market or stockbrokers, feel free to reach out to us.
