What is Supply and Demand in the Stock Market?

1. What is Supply and Demand in the Stock Market? Supply and demand are the basic economic principle that determines the price of stocks. It works similarly to any other market, like real estate or commodities. Demand = The number of buyers willing to purchase a stock at a given price. Supply = The number of sellers willing to sell a stock at a given price. When demand is higher than supply → Stock price goes up When supply is higher than demand → Stock price goes down 2. Why Does Supply and Demand Change? Several factors influence the supply and demand of a stock, such as: A. Company Fundamentals (Earnings, Growth, etc.) If a company reports higher-than-expected earnings, more people want to buy the stock, increasing demand → price rises. If a company reports losses or slowing growth, investors may sell → price drops due to higher supply. B. Market Sentiment (News & Events) Positive news (new product launches, acquisitions, strong industry growth) → more buyers → higher demand → stock price rises. Negative news (lawsuits, scandals, regulatory issues) → more sellers → higher supply → stock price falls. C. Institutional Buying & Selling Big investors (mutual funds, hedge funds, FIIs, DIIs) buy and sell in huge quantities. Their actions create large shifts in demand and supply. If an institutional investor buys a large chunk of shares → demand increases → price rises. If they start selling → supply increases → price drops. D. Economic Factors (Interest Rates, Inflation, etc.) Low interest rates = More liquidity in the market → Higher demand for stocks → Prices rise. High interest rates = Borrowing becomes costly → Investors move to bonds or FD → Demand for stocks decreases → Prices fall. Read more by clicking on the PDF do not forget to follow & ask your queries to me