What are the factors affecting the share market

What are the factors affecting the share market: In this blog, you will learn about Qualitative factors affecting the market price of the shares.


Qualitative factors affecting the share market

What is Qualitative Analysis?

Qualitative Analysis uses subjective judgment to analyze a company's value or prospectus based on nonquantifiable expression, industry cycle, the strength of research and development, and labor relations.

Table of content

1) GDP

2) Inflation

3) Monetary Policy

4) Fiscal Policy

5) Interest Rates

6) Budget

7) Economic and political stability

8) Infrastructure

9) Monsoon

10) Balance of Payment

11) Conclusion

GDP

  • GDP is the final monetary value of the goods and services produced within the country during a specified period, normally a year. In simple terms, GDP is the measure of the country's economic output in a year.
  • Growth rate of GDP indicates the growth rate of the economy. 
GDP

Inflation

  • Inflation is an increase in the price of goods and services in the economy. In another word, Inflation is a decrease in the purchasing power of money. For example, five years ago the price of noodles was RS 15 which current price is RS 20. It indicates that in five years there is an increase in the price of noodles and a decrease in the purchasing power of the money.
  • Higher inflation is usually looked at as a negative for shares because it increases the borrowing costs, increases input cost(material, labor, overhead), and reduces the standard of living. But probably, most importantly in this market, It reduces expectations of earnings growth, putting downward pressure on the share market.

Monetary policy

  • Monetary policy is the macroeconomic policy prepared by the central bank. It involves the management of the money supply and interest rates. it is the demand side economic policy used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth, and liquidity.
  • The primary objectives of monetary policy are to reach and maintain a low and stable inflation rate, and to achieve a long-term GDP growth trend.
monetary policy

Fiscal policy

  • Fiscal policy is how a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.
  • It is the sister strategy to monetary policy through which a central bank influences a nation's money supply.
  • Using a mix of monetary and fiscal policy, the government can control economic phenomena.
fiscal policy



Interest Rates

  • Higher interest rate tends to negatively affect earning and share prices (except the financial sectors)
  • There is an inverse relationship between interest rates and the price of the shares (share market). when the interest rates increase stock market decreases and when interest rates decrease stock market increases.

Budget

  • The budget draft provides an elaborate account of the government revenue and expenditure.
  • A deficit budget may lead to a high rate of inflation and adversely affects the cost of production.
  • surplus budget may result in deflation. hence, a balanced budget is highly favorable to the share market.
budget


Economic and political stability

  • A stable political environment is necessary for steady and balanced growth.
  • stable long-term economic policies are needed for industrial growth.
  • A stable government with clear-cut long-term economic policies is required for the good performance of the economy.

Infrastructure

  • The development of an economy depends upon the infrastructure available.
  • The availability of infrastructural facilities such as power, transportation, and communication system affects the performance of the companies.
infrastructure


Monsoon

  • The performance of agriculture to a very great extent depends on the monsoon.
  • The adequacy of the monsoon determines the success or failure of the agricultural activities in Nepal. 
monsoon

Balance of payment

  • Also called the balance of international payments.
  • BOP is a statement that records all the monetary transactions made between residents of a country and the rest of the world during any given period.
  • The difference between imports and exports may be surplus or deficit.

Conclusion

The above mention points are part of the economic analysis. Before investing in the share market, investors shall have to do the economic analysis of the country. After analyzing the different aspects of the economy of the country, If it seems viable then you can invest in the stock market by doing a fundamental analysis of the company.


keep learning because there is no earning without learning. If any query comment below, I would be happy to answer.

Have a great time 
Thank you.

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