Factors affecting Stock Market Activities

The stock market as such can be effected in favour or adversely because of below listed so many reasons/ factors or incidents on Global or domestic level.
1. Price rigging: being one of the biggest loopholes may suffer scams and in turn affect the stock market badly.
The stock market is a money-driven Eco-system thus scammers are naturally attracted to it. They keep on finding the loop-holes in the system for exploitation and their benefits. One of the biggest loopholes was the price-rigging. harshad mehta scam and then the ketan parekh scam displayed exploitation of this vulnerability.
2. Regulatory Actions
The regulatory actions taken by the Govt. regulatory bodies govern the position of stock market to a great extent. Such as SEBI, has brought transparency in the stock market Eco-system and developed investor’s trust by introducing discount brokerage and several other measures to increase the active participation of investors in the stock market. Thus gives traders & investors time to go through the news and take decision patiently and let the market cool down.
3. RBI monetary policy
The time to time monetary policies of Reserve Bank of India also regulates the activities of Stock market in India. From time to time RBI revises the repo and reverse repo rates. It is based on the RBI’s view regarding inflation. RBI fixes the repo rates depending on more or less spending by people than their earning, accordingly it increases/decreases the rates. The increased interest rates on credit cards and loans force people to minimize the overspending and save more in the banks. But at the same time it’s negative side i.e. higher interest rates compels companies pay more on the loans as such the industries relying heavily on capital, suffer more as their manufacturing costs increases, leading to their products become expensive.
4. Market Sentiments
Most participants don’t follow the basic rule of delivery trades in the stock market “ There is a basic rule be greedy when the market is fearful and be fearful when the market is greedy”, which is mostly not followed by the participants. They just follow the movement of herd, for example if the price is going down there will be huge selling from most of the speculators/traders. Similarly same thing happens when prices are rising. They want to leverage the bullish environment. This is called market sentiment.
5. Global incidents
The stock market activities are also affected by any sort of global incident like the cost of manufacturing, transportation, import-export of goods in a country etc. Any war-like situation or end of this situation also do the same thing.
6. Weather
By the forecast by the meteorological department regarding good or bad weather also not only affects the commodity market but the equity market also like rain, high/low temperature etc. For example a good rain means good crop hence god income by farmers which means more money to buy things necessary for a farmer.
7. Natural Disasters
Natural disasters (e.g. earthquake, drought, flood, cyclones etc) bring chaos to the real life of humans.
8. Political situations
On practical grounds politicians are also human beings and they do have their own judgements. A rise or fall of a particular political party can be hugely benefit/loss. A tug of war ending between two political parties after election results may also fluctuate the market either up/down side.
9. Government policies
Every industry runs highly on the government policies. A government’s new policy may be hugely profitable to one industry and simultaneously the same policy may be disastrous for another industry. It’s also possible that a policy may be profitable and non- profitable to all other industries. source ET