Is the Share Market Efficient?

Very interesting question as this does come across as a query to many beginners & people who are looking at the stock/share market from outside

A monitored share market with checks & balances is a true reflection of the companies listed and the health of the country’s economy

Let me elucidate on this

In India, we have SEBI(Like SEC in America) that monitors that market on a daily basis and puts in place checks & balances.

Stock Market Regulator in India: SEBI

Now coming to the changing of the stock value in seconds.

The stock market(like any market) works on the principle of “Supply-Demand”.

Demand-Supply Graph

If the company announces dividends or a new partnership that can generate huge profits, a stock(a representative fraction of the company), sees a sudden surge in demand. This leads to rising in acquisition costs. This phenomenon is used by Stock Market Traders & Short Term Investors to book profit by offloading their holding.

Now coming to the market in general:

The images below show the performance of Nifty on a Day, 6-Month, and 5-Year Basis

Nifty 50 (1-day Performance)
Nifty 50 (6-Month Performance)
Nifty 50 (5-Year Performance)

Here we can see that any aberrations that are happening in the stock price are a minuscule deviation from the mean value. This value reveals itself over a long-term horizon.

Hope you find this helpful

You can follow my blog or Facebook page on investing for getting insight into other stocks.

Happy Investing!!

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