Four reasons why a company’s stock price rises dramatically in a single day

Each stock price movement has a unique story to it, which needs to be researched. I share below the four most common reasons I have seen behind 1 day stock price increase (dramatic).

Before that, I will assume dramatic price increase in 1 day means 5–10% increase. I think this is a decent definition of dramatic increase, given 10–12% is what Nifty 50 index gives in an year. So if you get that kind of return in 1 day, I think that is dramatic enough. I have used examples of listed companies in Indian stock market in this post.

Reason 1: Quarterly Earnings Report exceeds expectations

People buy stocks at a valuation which seems justified to them. A slow growing company gets lower valuation (lower PE). A high growing company is assigned a higher valuation (high PE) by the market.

Earnings forecasts from equity analysts play a large role in shaping market’s expectations from a stock, and resulting valuations. Company reports published by equity analysts are widely read by investors. These analysts are also interviewed on TV to share their…