Stock prices move because of demand and supply. When more money wants to buy a stock than sell it, the price rises until sellers appear; when sellers dominate, the price falls until buyers step in. Everything else (news, results, sentiment) moves prices only by shifting this balance.
How does demand and supply set the price, exactly?
There is no committee fixing prices. The exchange simply matches buy and sell orders continuously.
Picture Farhan wanting to buy 100 shares of Kaveri Motors. Sellers are queued at ₹502, ₹503 and ₹505; buyers wait below at ₹501 and ₹500. If Farhan buys at market, he lifts the ₹502 sellers, and if enough buyers follow him, the ₹502 and ₹503 queues empty out, so the next trade happens at ₹505. The price "went up" only because buyers exhausted the nearby sellers. The reverse happens when selling pressure eats through the buyers' queue.
That queue of waiting orders is exactly what you see in the depth window. The mechanics are covered in what are bid, ask, and the bid-ask spread.
What shifts the balance between buyers and sellers?
Anything that changes what people think the business (or the market) is worth:
- Company results. Quarterly profits above expectations attract buyers; a miss brings sellers. Note the word expectations: a good result can still sink a stock if the market had hoped for better, because the hope was already in the price.
- Company news. New orders won, a factory fire, a promoter selling shares, a credit-rating change.
- Industry and economy news. Interest-rate changes, monsoon forecasts for agri stocks, fuel prices for airlines, government policy changes.
- Global cues. Overnight moves in US markets, crude oil, or the rupee often set the opening tone.
- Flows. Large institutional buying or selling (foreign or domestic funds) can move prices for days without any "news" at all.
- Sentiment. Fear and greed amplify everything. In panic, people sell good and bad companies alike; in euphoria, weak stocks fly too.
Short term, the mix is noisy and often unexplainable. Some days a stock falls simply because a large seller needed cash. Over years, prices tend to track the business: earnings growth pulls the price up with it, and this is why long-term investors obsess over profits rather than daily wiggles.
Why do prices sometimes jump or freeze?
Two mechanics surprise beginners:
- Gaps. News lands while the market is closed, so the next day's price opens far from yesterday's close. There was no chance to trade in between.
- Circuit limits. Exchanges cap how far many stocks can move in a day. On extreme news, a stock can hit its band and effectively stop trading in one direction. See what are circuit limits or price bands.
Things to keep in mind
- Every price move has the same proximate cause, an imbalance of buy and sell orders. "Why did it fall?" often has no cleaner answer than "more sellers than buyers today".
- Markets move on surprises, not on news alone; widely expected good news is usually already priced in.
- Daily moves are mostly noise; don't read a verdict on a business into every red or green day.
- Beware of anyone claiming to know tomorrow's price, if the reason is genuinely new information, it is already moving the price before you act.
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