Factors Affecting Share Prices

What are the major factors that affect share prices in the stock market? This is one of the most frequently asked questions by stock market participants. There are varied internal and external factors affecting the price of a share. Internal factors are those that depend on the firm such as share bonuses, stock split, company dividends, etc. External factors are those which are beyond the control of the firm, such as raw material prices, economic trends, inflation, investor confidence, etc.

Following is the list of various factors that can influence the price of a stock:

• The performance of the industry or sector that the company is in. The stocks of companies operating within the same industry tend to move in tandem with each other.
• Stock repurchase or share buyback. The company buys back its own shares to reduce the number of shares outstanding.
• A stock split which increases the number of shares in a public company. When a company declares a stock split, its share price will decrease.
• A rights issue which increases the supply of a company's shares. This can lead to a depressing effect on the share price.
• Market forces of supply and demand drive the changes in stock prices every day.
• Stock price may drop on the ex-dividend date.
• New products or services introduced to the market.
• Opening up new markets with existing product.
• The company obtained new major contracts.
• Positive news about a company.
• Change in regulatory environment.
• Short and long positions. 
• Business expansion or growth.
• Mergers and demergers. 
• Acquisition of companies.
• Drop in product demand. 
• Loss of big customer. 
• Company lawsuits.
• Management changes.
• Monetary policies. 
• Interest rates. 
• Insider trading.
• Political factors. 
• World events.
• Strikes. 
• Inflation. 
• Rumors.
• Natural disaster.