It is difficult to predict how the market reacts when results come, even if the results are seen as \u2018good\u2019. The market often surprises, as the late Mr Jhunjhunwala used to quip in his own inimitable way comparing it to the moods of humans. It is helpful to understand why stocks fall despite delivering great results. In fact, the definition of a \u201cgood quarterly result\u201d itself is subjective, leading one to often raise the question: ‘why are markets down today?’. It could be relative to the market, relative to the company\u2019s past performance. <\/p>\n\n\n\n
When a significant number of investors use the good result momentum to book profits, it may cause a fall. The market also may expect price to go up if they anticipate good results; hence such an occasion might be used to book profits. <\/p>\n\n\n\n
Sometimes the stock could be caught in the vortex of technical based trading with some traders shorting it aggressively. They intend to buy at a lower rate later to make a profit, but in the process the stock gets hammered.<\/p>\n\n\n\n
The market sentiment itself could be negative. Often when good results do not lead to an appreciation in the price, we can say that the market is very bearish. In such an environment, a bad result could lead to a further step fall. Such a \u2018bad stock\u2019 falling, could drag down other stocks with \u2018good results\u2019 for no fault of theirs.<\/p>\n\n\n\n
Some traders work on margins and are forced to sell due to lack of liquidity. Any such selling pressure could impact any good stock. This is regardless of the results being good for the company. All said and done, liquidity is still the king and is a prime reason why stocks fall.<\/p>\n\n\n\n
Finally it is all about \u201cExpectations\u201d. Even a 20% growth in numbers may not be ok if one is expecting a 30% growth. An analyst group that is crunching its own estimates may recommend a sell if there is any shortfall in their expectations. This ‘shortfall’ in expectations is why stocks fall in many cases.<\/p>\n\n\n\n
When earnings and sales are growing well, yet the company is not showing healthy cash flows then there could be a concern on the company. The concern could be about a blip in performance or more seriously about the management not being fully transparent in their disclosures.<\/p>\n\n\n\n
Even if the company delivers stellar results, tie stock might still fall if the management gives a guidance that is pessimistic. For example, a bank might deliver great results but may announce that Non Performing Assets might increase in the near term. Such a guidance is enough to set the stock price tumbling.
<\/p>\n\n\n\n
The markets are composed of investors, each with different expectations and timeframes. They react differently and a tipping point towards one side can make a stock zoom or fall. The above reasons explain why stocks fall. Interestingly many of these factors may overlap, thereby accelerating the movement of the stock. A prudent investor would use such occasions to accumulate more quantities of good stocks given the emotional arbitrage that is available.
<\/p>\n\n\n\n
Ram Kalyan Medury<\/a>, Founder & CEO Maxiom Wealth<\/a> <\/p>\n\n\n\n <\/p>\n\n\n\n <\/p>\n\n\n\n\n Maxiom Wealth \u2014 Free Tool<\/p>\n A 7% FD rate drops to ~4.9% after 30% tax for high earners \u2014 barely above inflation. See how FD compares to goal-based investments over your horizon.<\/p>\n FD Returns Calculator \u2192<\/a>\n Talk to a Financial Advisor<\/a>\n<\/div>\n\n","protected":false},"excerpt":{"rendered":" It is difficult to predict how the market reacts when results come, even if the results are seen as \u2018good\u2019. The market often surprises, as the late Mr Jhunjhunwala used to quip in his own inimitable way comparing it to the moods of humans. It is helpful to understand why stocks fall despite delivering great… Read More »7 Reasons Why Stocks Fall Despite Reporting Strong Results<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":4528,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[461,471,670,847],"class_list":["post-1599","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing-fundamentals-mutual-funds-guide","tag-latest-stock-market-news","tag-long-term-investment-stocks","tag-share-market-down","tag-why-stocks-fall"],"_links":{"self":[{"href":"https:\/\/maxiomwealth.com\/blog\/wp-json\/wp\/v2\/posts\/1599","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/maxiomwealth.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/maxiomwealth.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/maxiomwealth.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/maxiomwealth.com\/blog\/wp-json\/wp\/v2\/comments?post=1599"}],"version-history":[{"count":5,"href":"https:\/\/maxiomwealth.com\/blog\/wp-json\/wp\/v2\/posts\/1599\/revisions"}],"predecessor-version":[{"id":6620,"href":"https:\/\/maxiomwealth.com\/blog\/wp-json\/wp\/v2\/posts\/1599\/revisions\/6620"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/maxiomwealth.com\/blog\/wp-json\/wp\/v2\/media\/4528"}],"wp:attachment":[{"href":"https:\/\/maxiomwealth.com\/blog\/wp-json\/wp\/v2\/media?parent=1599"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/maxiomwealth.com\/blog\/wp-json\/wp\/v2\/categories?post=1599"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/maxiomwealth.com\/blog\/wp-json\/wp\/v2\/tags?post=1599"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Stay updated with the latest market and investment updates. Join Maxiom Wealth on, Linkedin<\/a>, YouTube<\/a>, Instagram<\/a>, Facebook<\/a>, Quora<\/a> for more!<\/pre>\n\n\n\n
For high quality investment advice and to grow wealth, download Maxiom Wealth App on iOS App Store<\/a> and Android Play Store<\/a>.<\/pre>\n\n\n\n
Are FD Returns Beating Inflation After Tax?<\/h3>\n