What is a Share Price and How is it Decided?
You see Infosys at ₹1,840 and Reliance at ₹2,950 — but who decides these prices? And why do they change every few seconds? The answer is simpler than you think.
Key takeaways
The basic answer: supply and demand
A share price is decided by what buyers are willing to pay and what sellers are willing to accept — at any given moment. If more people want to buy a stock than sell it, the price goes up. If more people want to sell than buy, the price goes down. No single person or authority sits and decides the price. It is determined continuously by millions of transactions happening on the exchange every day.
A simple example
Imagine 100 people want to buy shares of a company, but only 20 people want to sell. There are not enough shares to go around. Buyers start offering higher prices to attract sellers. The price rises. Now flip it — 100 people want to sell, but only 20 want to buy. Sellers start lowering their price to find buyers. The price falls. This tug of war happens continuously during market hours.
What drives people to buy or sell?
Many things influence investor decisions. Company earnings — if a company reports higher profits than expected, more people want to buy, pushing the price up. News — a new product launch, a big contract win, a regulatory problem, or a scandal can all move prices. Economic conditions — interest rates, inflation, and GDP growth affect how investors feel about the market overall. Global events — wars, oil price changes, and decisions by the US Federal Reserve can move Indian stock prices too.
Why does the price change every second?
Because trades are happening constantly during market hours. Every trade — even a small one — updates the price. A stock trading at ₹500 can move to ₹502 and back to ₹499 within minutes simply because of the continuous flow of buy and sell orders. This is completely normal and not a sign that anything is wrong.
Does a higher share price mean a better company?
Not at all. A stock priced at ₹10 is not cheaper or worse than one priced at ₹5,000. What matters is the value of the entire company, not the price of one share. A company with 10 crore shares at ₹50 is actually larger than one with 1 lakh shares at ₹5,000. This is where market cap comes in — which the next article covers in detail.