While price of stock in a single day is a matter of interest for intraday trading, thoughtful traders depend on long-term pricing of stock. An investor needs to know the factors that determine the stock prices in financial market.

Inflation and stock prices

There are several factors in the economy that acts as determinants of stock market. To cite an example, level of inflation is a sure indicator of stock prices. In case the inflation level shoots up, the stock market will go into slump and the converse is also true.

Consequently the slump in financial market will raise the concern of government and the interest rate will be hiked as a corrective measure for inflation. This is the time when an investor needs to be thoughtful about the implication of government's financial plans. An increased rate of interest may cause the economy to grow rapidly. However, this economic growth initiated by interest rate rise cannot be a good signal for business concerns. As a direct result of it the companies will suffer and thus the performance of those company stocks will be poor.

The above explanation gives a clear picture as to how inflation affects stock market and corrective measure of government further takes the market into a passive mode.

An investor who has entered the stock market for a long-term benefit must take into account the factors that move the financial market as well the companies that are listed in it. This sophisticated analysis can only offer a safe position to an investor. This will necessitate study of the company's earning. Simultaneously one should keep an eye on the management skill of the company by going through the periodic policy reports of a company. A quick paraphrasing of the policy reports into practical implication on the company will speak a lot about its stock performance.

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