Discover how news, social media, and information drive stock markets and investor choices.
The stock market is very different from what it used to be in the 1990s. Stocks rise and fall with the speed of thought, so investors have to deal with lots of numbers, charts, and data to make smart choices for their money.
However, there is a big player that can manipulate the stock market – it is the power of news and information.
We live in a world where just one tweet can make stock prices shoot up, a big news story can cause chaos in the trading world, and a company’s earnings report can change everything overnight.
In this article, we will examine how news and information affect the stock market. We will also see how fake news can manipulate investors and will figure out how to tell what’s real news from the massive amount of information out there.
Role of News in Stock Market Movements
News is like a powerful engine that drives stock market’s volatility. Here are a few types of news because of which share price fluctuates and influences investor’s decisions.
1. Company News
A company’s big announcements can affect its stock price a lot. Good news, like stronger earnings than expected or launching a new product, can make the stock price go up. Bad news, like regulatory issues or corporate scandals, can drop the stock price.
For example, on October 12, 2023, TCS issued its results for the second quarter of the financial year, and because it didn’t do as per the market expectation, its stock price saw heavy selling pressure. But sometimes, when the stock market already knows bad news is coming, the stock price can go up when the bad news is confirmed. Here, we say that the news was ‘factored in’ by the markets.
2. Big Economic News
GDP numbers, inflation forecasts, and interest rates can change the stock market sentiment. If the news is good, like impressive export numbers or raw material prices going down, stock prices can increase because investors are optimistic about the economy.
But if the news is bad, it can affect market sentiments. So, on days when important meetings or announcements are going to take place, like the Monetary Policy Meeting (MPC) and the Union Budget, the stock market can get very volatile.
For example, when the RBI made a surprise announcement in the August MPC meeting on August 10, 2023, saying they were going implement Incremental-CRR to suck the excess liquidity caused by deposits of Rs 2,000 notes, Bank Nifty dropped over 1% because this was bad news for banks.
3. Social Media’s Impact
Social media has become a big deal when it comes to news about the stock market. People use platforms like Twitter, Facebook, Instagram and Telegram to share what is happening in real time. It is not just regular people – traders and investors use social media to talk about stock trading tips. Sometimes, social media can spread rumours and fake news, which can be confusing.
Information for Decision-Making Process
1. Financial News Channels
Financial news channels provide real-time financial news, market analysis, and expert commentary. Investors often tune in to these channels to stay updated on the latest market developments and gather insights from financial experts. You can also rely on SEBI-registered brokerage and research analysts for financial information.
2. Research Reports
Financial institutions, brokerage houses, and independent research firms produce research reports on various stocks and sectors. These reports offer detailed analyses of a company’s financial performance, future prospects, and investment recommendations.
What Should Investors Avoid?
Differentiating between real and fake news is crucial, especially in the world of finance and investing. Here is how you can do it:
1. Double-Check Information
Before you act on any investment information you find on social media, it is important to make sure it is true. Look for the same information from multiple reliable sources. Trustworthy financial news websites, official government announcements, and statements from the companies involved are more reliable than individual social media posts. For example, if you see a social media post claiming that a company is about to go bankrupt, take a moment to check official reports from the company or well-known financial news outlets.
2. Beware of Fake Accounts
Sometimes, scammers create fake social media profiles that pretend to be famous experts or big financial institutions. They post fake news, rumours, or exaggerated claims about a certain stock. These posts can make it seem like you need to make a quick decision. That is why it is important to check the facts and only follow trustworthy sources. Also, take the time to do your research and ensure the information is right before you do anything about it.
In conclusion, news, social media, and where you get information are like strong engines that can influence you to make decisions. You need not worry much as there is a hero in this story: the Securities and Exchange Board of India, or SEBI. They are the ones who make sure the market is fair for everyone.
Recently, SEBI has come up with a rule that the top 100 companies by market capitalisation must confirm, deny, or clarify any market rumour reported in the mainstream media. This rule is going to come into effect from February 1, 2024.
*The article is for information purposes only. This is not an investment advice.