What is share price and how are they determined

Published on: Fri Mar 17 2023

What is share price and how are they determined

The current market price at which a single share of a publicly traded company is bought or sold on a stock exchange is called/referred to as the share price. Shares represent a company's ownership and allow investors to participate in its growth and profitability. In this article, we will define share price, explain how it is calculated, and discuss the factors that influence it.

How Is the Share Price Calculated?

The forces of supply and demand determine a company's share price. When there are more buyers than sellers for a stock, the share price rises; when there are more sellers than buyers, the share price falls.This means that the price of a stock can change/vary frequently depending on market sentiment, economic conditions, and the company's performance.

The primary market is where a company raises capital for the first time by issuing shares to investors. At this stage, the share price is usually determined by the company and its underwriters. Underwriters are investment banks that collaborate with the company to determine the number of shares to be issued and the price at which they will be made available to the public.

Once issued, the shares can be bought and sold on a secondary market, such as a stock exchange. The secondary market share price is determined by supply and demand forces. Shares are bought and sold by investors based on their evaluation of the company's financial performance, economic conditions, and overall market sentiment. As a result of these factors, the share price can fluctuate frequently.

Factors that Affect Share Price

Several factors can affect the share price of a company. These include:

Financial Performance: A company's financial performance is one of the most important variables/factors influencing its share price. Revenue growth, earnings, and profit margins are all important to investors. When a company reports strong financial results, its share price rises; when it reports poor financial results, its share price falls.

Economic Conditions: Economic conditions such as inflation, interest rates, and unemployment can all have an impact on a company's share price. Inflation and high interest rates can reduce consumer spending, affecting revenue growth. Low interest rates, on the other hand, can stimulate economic growth, which can benefit businesses.

Industry Trends: Industry trends can have an impact on a company's share price. Companies in a rapidly growing industry are more likely to experience strong revenue growth, which can increase their share price. In contrast, if an industry is in decline, companies in that industry may undergo/experience slow revenue growth, lowering their share price.

Changes in Management: Changes in a company's management team can have an impact on the share price. If a company hires a new CEO with a proven track record, investors may become more optimistic about the company's future prospects, causing the share price to rise. If a company's management team is viewed negatively, its share price may fall.

Political events such as elections, government policies, and geopolitical tensions can all have an impact on a company's share price. For example, if a new government implements policies that are viewed negatively by investors, the share price of that country's companies may fall.

Finally, the share price is the current market price at which a single share of a publicly traded company can be purchased or sold on a stock exchange. The share price is determined/affected by supply and demand forces, and it can fluctuate frequently depending on a variety of factors such as the company's financial performance, economic conditions, and overall market sentiment.

Returns are subject to market risk.

Past performance do not assure future returns.

Name: Algonauts Advisory Services Private Limited

Registration Number: INA000017277

Type: Non-Individual

Validity: Oct 28, 2022 - Perpetual

Contact Details (Principal Officer):

Mr.Sharad Sankaran:
(Principal Officer)
Algonauts Advisory Service Private Limited:
Email: principal.officer@algonauts.in
Contact Number: +91 8108832455
Address: 1, Dora Rose, I C Colony, Borivali West, Maharashtra, Mumbai 400103.

Contact details of SEBI office:

Office of Investor Assistance and Education, Securities and Exchange Board of India, SEBI Bhavan, Plot No. C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (E), Mumbai - 400 051.

Disclaimer:

Algonauts Advisory Private Limited (Algonauts Advisory Private Limited) is an investment advisor engaged in the equity advisory business. Algonauts Advisory Private Limited is Sebi registered investment adviser. Algonauts Advisory Private Limited Research Analyst SEBI Registration Number - INA000017277. Algonauts Advisory Private Limited SEBI Registration INA000017277.
Recommendation in reports based on technical and derivative analysis centre on studying charts of a stock's price movement, outstanding positions, trading volume etc as opposed to focusing on a company's fundamentals and, as such, may not match with the recommendation in fundamental reports. Investors may visit www.algonautsadvisory.in to view Technical Research Reports.
The information and opinions in this report have been prepared by Algonauts Advisory Private Limited and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of Algonauts Advisory Private Limited. While we would endeavour to update the information herein on a reasonable basis, Algonauts Advisory Private Limited is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent Algonauts Advisory Private Limited from doing so.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. Algonauts Advisory Private Limited will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. Algonauts Advisory Private Limited accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.
Algonauts Advisory Private Limited or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months.
Algonauts Advisory Private Limited encourages independence in research report preparation and strives to minimize conflict in preparation of research report. Algonauts Advisory Private Limited or its associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report.
Accordingly, neither Algonauts Advisory Private Limited nor Research Analysts and their relatives have any material conflict of interest at the time of publication of this report.
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. Algonauts Advisory Private Limited or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report.
Since associates of Algonauts Advisory Private Limited and Algonauts Advisory Private Limited as a entity are engaged in various financial service businesses, they might have financial interests or actual/ beneficial ownership of one percent or more or other material conflict of interest various companies including the subject company/companies mentioned in this report.
Algonauts Advisory Private Limited may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Neither the Research Analysts nor Algonauts Advisory Private Limited have been engaged in market making activity for the companies mentioned in the report.
We submit that no material disciplinary action has been taken on Algonauts Advisory Private Limited by any Regulatory Authority impacting Equity Research Analysis activities.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject Algonauts Advisory Private Limited and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.