The supply and demand determine a share price. If the demand is high, it will increase, and if the demand is low, it decreases. Stock prices depend on the bid and ask of the stock. A bid is an offer to buy a certain number of shares for a specific price. An ask is an offer to sell a certain number of shares at a particular price.

Exchanges calculate a stock's price instantly by finding the price at which the maximum number of shares are transacted at the moment. The price changes if there is a change in the buy or sell offer of the shares.

How to calculate the market price of a share?

To determine the market cap of a share, you need to estimate the market price of the share. To figure out how valuable the shares are for traders, take the last updated value of the company share and multiply it by outstanding shares.

Another method to calculate the price of the share is the price to earnings ratio. You can calculate the P/E ratio by dividing the stock price by its earnings in the last 12 months.

The intrinsic value of stock = P/E ratio X Earning per share

Growing companies generally have a higher P/E ratio while established business have slower P/E growth rates.

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How is the initial value of shares determined?

Company shares are issued first in the primary market; Initial Public Offer (IPO) for the general public to raise funds for meeting capital requirements. The initial price of the share is determined in IPO, considering the performance and net present value of the firm.

Once the trading starts, the share price will begin fluctuating based on demand and supply of the shares in the secondary market. The prices may increase if there are more buyers for the stock and decrease if there are more sellers.

Which factors affect share prices directly?

1. Supply and demand are the most critical factors that affect the share price directly. If a share is bought more than it is sold, the price will rise because the stake is sought after the demand is more than the supply.

2. A company's earnings and profitability from producing and selling goods and services can also affect its share prices.

3. Behavioural factors of traders and investors in the market can change the price of stocks.

4. If supply and demand are equal, the share prices remain stable with very little increase and decrease in the price. If one of the factors outweighs the other, an abrupt change can be expected.

5. When a company issues new shares for purchase in the market, the number is limited. If a lot of investors are trying to buy these shares, and the supply is low, the shares price will increase.

6. If a company buys back its share from the market, it reduces the number of shares in circulation. Due to the reduced supply, the prices can increase.

Which factors affect the share prices indirectly?

1. Interest rates

2. Changes in economic policies

3. Inflation

4. Deflation

5. Market sentiment

6. Industry trades

7. Global fluctuations

8. Natural disasters

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How is stock price calculated in real time?

The stock price is determined by the forces of demand and supply in real-time. The real-time stock price on a stock exchange reflects the price of the trade at which the maximum number of shares have been transacted by the market participants.

What is share price?

A share price, also called stock price, is the cost of buying one share in a company. This share price fluctuates as per the market conditions and is determined on a real-time basis by a stock exchange.

How can I see share prices online?

You can see share prices online through the official stock exchange websites, such as NSE and BSE. Else, you can check prices on the broker’s website with whom you have opened your Demat account. We recommend checking prices on AngelOne’s website.

Share price is decided by whom?

In the case of an IPO, the share price is determined by the company. Post listing, the share price on a stock exchange will be determined based on the matching of bid and ask prices from the buyers and sellers, respectively.

How to calculate share price after bonus?

To calculate the share price after bonus shares have been issued, the total value of the company before its bonus issue should be divided by the total number of shares outstanding after the bonus issue.