An interesting question and I had to answer this.
People tend to say its supply and demand but there is no actual link to it. The reason is that there is always someone ready to sell shares and always someone ready to buy shares at the prevailing market price.
Now, how are the prices detetmined.
An estimated prices are detetermined based on the earning capacity of company or its asset valuations or future earnings. These are what is termed and fundamental basis of pricing of stock. The other basis is technical which i will describe later on.
Any company is valued on the basis of the Net assets it has after deducting all the liabilities. Suppose a company has assets worth hundred crore and it has one crore shares then value of each share is Rs. 100. i.e. today if the company sells everything , what portion of it will come on each share holder hand that is the value of the share.
Another valuation is based on P/E ratio. It determines your share valuation based on earning model . There is earning capacity of every industry. i.e. all companies in that sector earns that much earning as per their turnover. it determines their industry P/E .
Share price = P/E x EPS (erning per share- how much one share of a company earns)
Suppose a industry has P/e of 30 and your company is earning Rs. 10 per share then your tentative share price should be Rs. 300\-
Share prices also depend upon revenue model i.e. If I need 10% of earning from my investment, then my share price should be Rs. 100 if my earning is Rs. 10.
The above given exampls are theoritical price. They need to be adjusted as per the condition of company such as how much debt company owes, it future contracts and contingetn liability, the Trade restrictions. For example, if a company is earnig good but it has high debt then also its share prices will be less then par with its theory price because of debt. of if the company has a great management then its price will be higher then normal price because it can take better decisions and enjoys more shareholders trust in terms of less fraud and good corporate governance.
Coming to technical aspects, after the prices are determined based on fundamental basis , the market price is also determined based on technical chartes and price movements. These are levels when investors tend to buy and sell their stocks. It is at buy levels on technical charts then people are ready to buy at given price and if its sell then they sell on given price. Technical traders do no think about the future fundamentals and they tend to book profits as per charts.
Thirdly, There comes trend traders who tend to buy when one stock is rising and they trade on the basis of hear say of others. They tedn to gain and lose huge at the same time.
Now answering your query, the long term prices are determined base on fundamental aspects and earning of company while the daily prices are determined based on sentiments and news.
Who changes price – No one and everyone. I know i can sell this at one Rs. higher so i tend to sell it at one rs. higher. I know i can sell this at three Rs. higher then i buy it at 1 Re higher to sell at 3 Rs. higher.
For example, If the fundamental price is Rs. 100 then i feel i can sell it at 101 so i put sale at 101. someone thinks he can sell it at 103 so he buys it at 101 and puts it 103. someone think he can sell at 105 so he buys at 103 but then everyone knows that it is worth 100 so no one buys at 105 so the person books a loss of Rs. 3 and sells again in 100 where the entire circles restarts. This is how many book profit and many book loss. When news comes, fourth person gets ready to buy it at 105 and then that becomes a new circle of 105–110.
However there are soo many forces and such hug people involved that is not easily possible to manupulate it in long term. The bull and bear grip depends upon technicals and sentiments however the real earners who mint money from market are long term investors.
Then comes market players but I will stop writing now as it gets complex with every addional thing that is explained.
Happy trading.
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