News is the major factor affecting the share prices making them increase or decrease. This news can either be specific to a single company, or be broad, as in case of changing interest rates. Whether the news is broad or specific, it highly influences the price of all the shares traded in a stock market.
Supply and demand, which are the basic concepts of an economy, are the core factors affecting the share price. As the number of investors willing to buy shares of a company increases, it indicates the increased demand, resulting in a higher share price. This increase in demand elevates the share price because the available number of stocks is limited, i.e. the supply is limited. And in a similar manner, as the demand for the shares drop, the supply increases hence lowering the share price.
Internal factors influencing the demand and supply of shares:
Attractiveness and performance of a company which is reflected in its consistent returns, good growth prospects and efficient management helps in the increase in its share prices. The negative performance with respect to any of these or other factors will also affect the share prices making them drop..
News and announcements from or about the company like the doubling of its profits will increase the price of its shares. And similarly, negative news and announcements like any scams involved or about their losses portraying the company in a bad light to its key players declines the share price.
Performance of the company's overall sector like retail, manufacturing or property also plays a key role in the increase or decrease of a share price. For example a major slump as a result of recession will highly affect the companies of that sector.
External factors influencing the demand and supply of shares:
Economic trends like inflation and GDP directly impact the stock markets, and hence affect the listed companies in the respective stock markets
Globalization has increased the interconnectivity between various stock markets all over the world. So the performance of major overseas markets has an impact on the local stock markets.
Geo-political events such as a terrorist attack could also cause the share markets across the world to move up or down.
Unfortunately, there is no guaranteed way to ensure an investor to buy for a low price and sell for a higher price. However, it is very important that an investor is proactive and aware of the economic and political events happening throughout the world. It will give him a fair idea of their impact on his shares, helping him become a smart and successful stock market investor.