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Understanding The Tenets Of Bear And Bull Markets

A bull market is the one that is consistently on the rise and the economic conditions remain generally favorable. On the other hand, a bear market is the kind of economy that’s receding and has the stocks declining in their value. Since financial markets are significantly influenced by the attitudes of the investors, these phrases also indicate the way investors feel regarding the market and the economic trends that follow. A brokerage calculator might help you understand it better.

Though a bear or bull market condition gets marked by the stock prices’ direction, there are several accompanying features that investors need to know about.

Demand and supply for the securities

In case of bull markets, a weak supply and strong demand for securities exist. In simple words, many of the investors want to purchase securities but only a couple are ready to sell those. Due to this reason, the share prices will keep rising as the investors start competing to gain available equity.

On the other hand, in bear markets, the exact opposite of this factor happens – more people want to sell instead of purchasing. The share prices go down as the supply is considerably higher than the demand.

Market behavior and investor’s psychology

As the behavior of the market gets determined and impacted by the way individuals see and react to the ongoing situation, the sentiment and psychology of the investor impacts the rise and fall of the market. As such, investor psychology and stock market behavior are mutually interdependent. In bull markets, investors voluntarily take part hoping to gain profits.

When it comes to bear markets, the market sentiments become negative. Investors start getting the money out from equities and in fixed-income securities while they wait for any positive movement in the market. All in all, declining stock market prices shake up the confidence of the investors. It makes the investors keep the money out of stock markets. This, in turn, ensures a general price declination with the increase in outflow.

Changes in the economic activities

As the companies whose stocks trade on the Indian exchanges are major participants in this greater economy, the economy and the stock markets are closely linked. Bear markets are closely linked to weaker economies. Majority of businesses cannot record major profits as the consumers aren’t spending enough. The way in which the market value stocks is directly impacted by profit declination.

The exact opposite of this factor occurs in the bull markets. People not only have more money to spare but also greater willingness to spend it. At the end of the day, it strengthens and divides the economy. You can check a trading mobile app to know more.

The final note

Both bull and bear markets have a major influence on the investments you make. Thus, it is a good idea for you to take a bit of time to figure out what the market does while making investment decisions. Keep in mind that in the long-term period, stock markets have always offered positive returns. So, consider different aspects of the situation and talk to a broker before making a decision.

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