You open your trading app on a Sunday morning. A stock you’ve been watching is up 7%. By Tuesday, it’s down 4%. No news, no announcement — just numbers bouncing around. What’s actually happening?
Understanding why share prices move is one of the most important lessons in investing. And the answer, at its core, is simpler than most people think.
The Only Rule That Matters: Supply and Demand
Every share price on the DSE is determined by one thing — the balance between buyers and sellers at any given moment.
- More buyers than sellers → Price goes up
- More sellers than buyers → Price goes down
That’s it. Every other factor — earnings reports, news, rumors, global markets — only matters because it changes how many people want to buy or sell.
Think of it like a bazaar. If everyone wants to buy mangoes and there aren’t enough, the price rises. If too many sellers show up and nobody’s buying, the price drops. The DSE works the same way, except the “mangoes” are shares.
What Creates Buyers? What Creates Sellers?
Now comes the interesting part. What makes someone decide to buy or sell a stock at a particular moment?
1. Company Earnings
This is the most fundamental driver. When a company reports strong quarterly earnings — say EPS jumps from ৳3.50 to ৳5.20 — buyers rush in because the company is making more money. The stock becomes more valuable.
The reverse is equally true. If a pharmaceutical company that was earning ৳8 per share suddenly reports ৳4, sellers will outnumber buyers. The stock drops.
Key insight: Share prices don’t just react to whether earnings are good or bad — they react to whether earnings are better or worse than expected. A company can report a profit and still see its stock fall if the market was expecting an even bigger profit.
2. News and Announcements
News creates sudden shifts in supply and demand. Here are some examples from the DSE context:
- Dividend announcement: A company declares a 30% cash dividend. Buyers pile in because they want to capture that dividend, pushing the price up.
- Rights issue: A company announces new shares at a discount. Existing shareholders may sell to raise cash for the rights, or new buyers may enter. The effect depends on the terms.
- Regulatory changes: BSEC announces new margin lending rules. Stocks that were being bought on margin may see selling pressure.
- Management changes: A well-respected CEO resigns unexpectedly. The market may react with fear and selling.
Not all news is equal. A record date announcement for dividends has a predictable, short-term effect. A factory explosion has a lasting, fundamental impact.
3. Sector and Market Sentiment
Stocks don’t move in isolation. When the banking sector is under pressure — maybe due to rising non-performing loans — all bank stocks tend to fall together, even the well-managed ones. When DSEX drops 100 points, most stocks decline regardless of their individual fundamentals.
This is market sentiment at work. Fear is contagious. So is optimism.
During the DSE bull run of 2010, stocks with no earnings, no assets, and no business model were hitting circuit breakers on the upside. Sentiment had completely disconnected from reality. When it snapped back, prices collapsed.
4. Interest Rates and the Economy
When bank deposit rates are high (say 9-10%), many investors prefer the safety of fixed deposits over the uncertainty of stocks. Money flows out of the market. When rates drop (say 5-6%), the stock market becomes relatively more attractive, and money flows in.
This is why central bank decisions matter. When Bangladesh Bank adjusts monetary policy, it indirectly affects every stock on the DSE.
5. Liquidity and Float
Some DSE stocks have very few shares available for public trading (low free float). When even a small amount of buying interest enters such a stock, the price can jump dramatically because there aren’t enough shares to go around.
Conversely, a stock with a huge free float — like a large bank with hundreds of millions of shares — is much harder to move. It takes massive buying or selling pressure to shift the price.
This is why small-cap Z category stocks can swing 10% in a day while a blue-chip barely moves 1%.
A Real Example: Anatomy of a Price Move
Let’s walk through a hypothetical but realistic scenario:
Company XYZ trades at ৳85 per share. Then:
- Quarter ends: Company reports EPS of ৳2.80, up from ৳1.90 last year. Buyers appear. Price moves to ৳92.
- Dividend declared: Board announces 20% cash dividend. More buying. Price hits ৳98.
- Record date passes: Dividend hunters sell. Price drops to ৳89.
- Sector rotation: Banking sector starts rallying and money moves away from XYZ’s sector. Price drifts to ৳84.
- Market correction: DSEX drops 3% in a week. XYZ falls to ৳78 despite no company-specific news.
Notice that the company didn’t change. Its factories kept running, its employees kept working. But the price moved ৳20 in both directions within a few weeks. That’s the market pricing and repricing based on shifting demand.
What Price Movements Don’t Tell You
Here’s something many DSE investors miss: short-term price movements tell you almost nothing about a company’s actual value.
A stock can drop 15% in a month and still be a great business. A stock can rally 40% and still be fundamentally overvalued. Price is what you pay; value is what you get.
If you’re investing for the long term — years, not weeks — daily price movements are noise. What matters is whether the company is growing its earnings, maintaining its competitive position, and treating shareholders well.
How FinTrail Helps You Track Price Drivers
Understanding why prices move is one thing. Actually tracking it across your portfolio is another. FinTrail lets you monitor real-time price changes, set price alerts for specific thresholds, and view fundamental data like EPS and P/E ratios alongside price charts. Instead of reacting to every tick, you can focus on what actually matters.
Think About This
-
If a stock drops 10% on no news at all, does that automatically mean it’s a buying opportunity? What else would you want to know before deciding?
-
Two stocks report identical EPS growth of 20%. One rises 8%, the other falls 3%. What might explain the difference?
-
During a broad market downturn, would you rather hold a stock with strong fundamentals that dropped 15%, or sell to avoid further losses? What factors would influence your decision?
