4 Factors That Shape Market Trends

Sep-13-2022Blog by – Mr. Dhruv AjmeraRead Time: 4 Min.Word Count: 545
1414 Factors That Shape Market Trends
Market trends largely influence the upswing and downswing in stock prices. When the
trends are favourable, the prices go up. When the trends are unfavourable, the prices go
down. Hence, market trends play a crucial role in determining whether the stock market will
skyrocket or crash.

You should be aware of these market trends so that you can anticipate the stock market
movement and manage your investment accordingly. Here are four key factors that shape
market trends.

1. Government Factors
Benchmark indices Nifty and Sensex touched a lifetime high after elections results showed
that Narendra Modi would become the new Prime Minister. On the contrary, when
demonetization and COVID-19 lockdown occurred in 2016 and 2020 respectively, both
indices tanked significantly.

As you can understand, the government’s macroeconomic policies – fiscal, monetary, and
supply side can have a significant impact on the stock market movement.

2. International Factors
When Russia declared a war on Ukraine, the economies of most countries went into a big
frenzy. It also had a major cascading effect on the stock and currency market in India.
Similarly, a steep rise in international oil prices, resulting in a global trade deficit and
inflation can also impact domestic markets. Hence, international geo-political and socio-
economic events can shape market trends in a big way.

The exchange of funds between the countries is also a determinant of market trends. When
the money leaves India, the rupee becomes weaker. When foreign money comes into India,
the rupee brings stronger. Ideally, a country should be more export-oriented to infuse more
capital into the financial system.

3. Speculation and Expectation
Speculation depends on the future expectations of market trends. Speculation drives the
current investor sentiment based on the fact that how they act today will affect tomorrow.

When investors speculate, they do it intending to buy or sell high-risk assets with the
expectation of high returns.

4. Supply and Demand
Supply and demand also affect a country’s economic health and thereby, its impact on the
stock market. When the demand for a financial asset is high but the supply is less, the prices
will go up. When the supply is more than the demand, the prices will go down. For example,
oil prices are sharply rising because the supply is less than the demand. There should be a
balance between supply and demand, but it is difficult to achieve.

It is important to note that all these four factors are closely interrelated. They can have a
ripple effect on each other. You have to monitor these market trends actively to leverage
them to your advantage. However, this is a time-consuming activity and you may also not
have access to insider information on the stock market. An equity investment advisory firm
such as Ajmera x-change can empower you with respect to market trends and guide you to
make the right investment decisions. Ajmera x-change is also a registered depository
participant in India and can help you to trade in securities and build wealth.

Get in touch to know more.
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