What is a Rally in Stock Market
As Sensex and Nifty continue to trade at their lifetime highs, the word ‘rally’ is thrown around quite a bit by market analysts, experts, ace investors and the market’s who’s who. But it has a lot of newbies stumped.
Well, worry not. Here is a quick explainer of a stock rally.
- What is the meaning of rally?
A stock market rally is a sudden and brief upsurge in prices of stocks, shares, bonds or indices. A stock market rally or a share price rally usually involves a spurt or a rise in a stock price in a short time span. It isn’t necessary that a share price rally can be seen only during the bullish phase of the markets. It can also be seen during a bearish phase.
A bullish phase is when the markets- Sensex or Nifty- keep making new highs or rise by a considerable degree. A bearish phase, on the other hand, is when the markets are making new lows or are sinking considerably.
Investors must note that a rally generally is preceded by a flat, stagnant or declining market.
The exact opposite of a stock market rally is a crash or a correction where a number of investors will see the benchmark index or a particular stock or stocks collapsing.
- Breaking down the term ‘rally’
In colloquial terms, a stock rally refers to a strong price appreciation of share prices or indices levels. What is a rally largely depends on the context in which one is investing or trading. For instance, a rally can be a 30-minute upsurge in the course of a day for an intra-day trader. It can also be months on end or sometimes a whole year together for an investor or a portfolio manager who is invested for the long term.
A rally is a result of high demand for stocks in the market which leads to a large amount of capital inflows in the market. With the markets flooded with liquidity, stock prices are often pushed up. How long a stock market rally or a share price rally persists depends on the dominant sentiment in the market and whether the enthusiastic buying is faced-off by selling pressures.
For example, a stock market rally is when there are a lot of investors and traders keen on taking a position in the market as opposed to sellers who are interested in exiting the markets by liquidating their positions.
Bottom line
The markets, that is, the Sensex and the Nifty, crashed once the lockdown was declared in March 2020. However, since then the markets have recovered with a splendid rally. You can also earn great returns from the markets by staying invested for the long run. A demat account opening is a matter of a few easy clicks with Motilal Oswal. Experience seamless and hitch-free trading at the most competitive rates right now.
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