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How does the market fix the share price? Sometimes it goes up and sometimes it comes down. Is there a formula for price fixation in the share market?

There is no formula for price fixation in the secondary market, that is, the stock exchange. In the primary market, that is, when a company issues shares to public and qualified institutions, there is some mechanism for price discovery and it is called book-building. But once the shares are listed in a stock exchange, the price goes up or down depending upon the market sentiments, demand and supply for a particular share, the fundamentals of the company, the fundamentals of the industry to which the company belongs, the fundamentals of the economy, the political situation, the world economic situation, etc. Sometimes a company may be doing well but its shares may fall in the market nevertheless as is happening now because of negative sentiments in the market caused by the US financial meltdown.

S. MURLIDHARAN

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