Why Do Stock Prices Fluctuate?
The stock market is essentially an auction market where shares, which represent ownership in the company, are bought and sold.
The markets where stocks are traded are called stock exchanges. In India, the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) are two big stock exchanges.
At these exchanges, traders buy and sell shares of companies.
Generally, the price of a stock is determined by supply and demand.
For example,
if there are more people wanting to buy a stock than to sell it, the price will be driven up because those shares have low supply and people will pay a higher price for them.
On the other hand, if there are a lot of shares for sale and no one is interested in buying them, the price will quickly fall.
Because of this, the market can appear to fluctuate widely.
Even if there is nothing wrong with a company, a large shareholder who is trying to sell millions of shares at a time can drive the price of the stock down, simply because there are not enough people interested in buying the stock he is trying to sell.
Because there is no real demand for the company he is selling, he is forced to accept a lower price.
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