Given the intuitive interfaces and seamless integration of technological tools on any stock trading app, online trading may seem like child’s play. However, predicting stock price movement and following the trends to make calculated decisions may seem tough to crack. Even if a trader is a beginner or a seasoned investor, comprehending the trends in the stock market appears to be a mysterious maze to most of them. After all, only some are wired to think and process, like Warren Buffett and Rakesh Jhunjhunwala.
In this blog post, let us break down the factors that should be considered while predicting and speculating stock price movements to trade stocks online without drowning in the pitfalls of this volatile ocean.
Three major drivers of the market drive the Indian financial market; they are Foreign portfolio investors (FPI), Foreign institutional investors (FII), and Domestic institutional investors (DII). Retail investors who don’t have the financial muscle to influence the price movements in NSE, BSE, and MSME follow in the footsteps of these giant investors to make decisions that impact them and the overall performance of the stock exchanges positively or negatively.
If these three players buy the stocks, the prices will go up, and if they are selling, the costs will fall. Thus, they can be considered the major catalysts to draw inflows and outflows to the stock market. Hence, their trading activity is the most visible and essential on the index. Following is a rundown of a few parameters which we can consider predicting stock price movements shortly:
- Mutual fund holding: prices of stocks held within the mutual funds greatly impact their trading activity on an app for share trading. Since they are big investments, both for long-term and short-term investors, they have the potential to influence the overall stock price movements. In the event of a mutual buying a stake in the company, the share price rises. Therefore, an increase in the mutual fund holding or mutual funds entering a new stock is a positive sign for investors.
- Influence of giant investors: as stated earlier, FPIs, FPIIs, and DIIs make up the majority of market liquidity. Tracking their trading activity can help to predict broader trends; by doing so, we can at least expect to gain above-average returns from our investments. Suppose they increase their holding in a particular company. In that case, it is like a green signal for retail investors to make an entry, as these seasoned players have a team of skilled analytical experts to provide leads to increase their valuation and earning expectations.
- Delivery percentage: seeing merely the volumes going up for a particular stock shouldn’t make investors happy; rather, they should dig to calculate the rate of deliverable quantity to the total amount traded. To understand this with a numerical example, we can consider the shares of XYZ company with a total traded quantity of 62,03,437 shares and a deliverable quantity of 35,09,518 shares, which means that the deliverable quantity percentage is 56.57%. The greater this percentage, the better it is considered, as it shows that investors have solid faith in the stocks.
These were just a few factors that are indicative and not exhaustive. To ace the index, one must be well-informed about the latest market trends, whether using a share trading app or any web-based trading platform.