Previous article covered basics of stock exchange. To continue with our learning, let’s talk about few other interesting facts. Stock market is an indicator of price movement of the equity market. Whenever you hear that Sensex is rising it means prices of the stocks are going up. Now you must be wondering why the prices rise or fall? There could be few valid reasons for that. There will be news from macro-perspective. These news could be of terrorist attack, nuclear attack, war declaration, interim budget, news about monsoon, change in government etc. known as index news, these developments can make movements of index very volatile. All the above mentioned news can affect prices of all the stocks listed in the stock exchange. In popular terms, this is known as sentiments of the market or market sentiments. For example, when terrorists attacked Taj hotel in Mumbai, stock prices fell.
Stock specific news is different from index news. The former one refers to particular news about a company, its financial results, product launch, and news of collaboration or tax exemptions by government etc. such news have great power to affect the price movement of a particular stock. To maintain balance in price movements, the authorities make sure to pick stocks from diverse sectors.
That ensures even if particular news pertaining to one sector is causing heavy price movements in stocks of that sector, other stocks are not getting affected by it. That way balance is maintained and Sensex saves itself from forced manipulation.