Regarding previous close and opening price

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This query is : Resolved

Viral Kamdar (Querist)

01 May 2014 Hello!

I have a query regarding share price. In accounts, what is closing balance, is ALWAYS the opening balance next day. But in share market it is not so.

If the share price of ABC Ltd is closed at Rs 125 on Tuesday, the same is not the opening price on Wednesday. It may be Rs 122 or Rs 129 or so.

For what reasons this difference take place? How the opening price mechanism works?

Please throw some light upon it.

Thanks.

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)

01 May 2014 .
First of all, you have to understand the "mechanism" of trading in share market.
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During the day, inflow of various news comes and all these have impact on index movement of share market.
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The shares of a company are traded at different price at different time.
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Right?
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Example :
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During a day, the share of a company were traded at : Open Rs.1025, then 1030, 1032, 1048 and closed at 1011.
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By evening i.e. after trading session, some positive news were there about bank rates.
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The next day the company's shares were traded as under :
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Rs.1018 (open), 1070, 1040, 1055, 1032 (close)
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Now I raise a query before you :
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Is it BINDING on a person trading in the shares of that company that he must be ready to buy at the SAME PRICE on TODAY which he offered YESTERDAY CLOSING but it couldn't materialize due to any reason?
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Your answer to this question would be the answer of your query raised.
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CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)

01 May 2014 Also keep in mind that until the shares are bought by you, is not the inventory held by you. Generally it is kept as investment.
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Hence how can you apply the same ratio where you don't have any inventory?
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I have given "some light" on the issue which you have asked.

:)

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)

01 May 2014 If you regularly trade in stock markets;

then you may value it at cost or market value whichever is lower.
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In that case; the opening balance in your books would be brought forward as same what was in your books in previous year.
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It has no relevance what OTHERS are trading the same shares on very next day.
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Message likes : 1 times

Viral Kamdar

Viral Kamdar (Querist)

02 May 2014 Thank you CA Surendra Kumar Rakhecha!

You cleared my doubt in a very much informative way!

Thanks again!

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