InvestorQ : What are the specific industry level variables and how do they impact the prices of the stocks?
Abhisha Yadav made post

What are the specific industry level variables and how do they impact the prices of the stocks?

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Arusha Ray answered.
3 years ago
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To understand the variables impacting the stock price, one needs to look at these variables from the point of view of the EIC model. The EIC model refers to (Economy, Industry, Company) model wherein the analyst first satisfies himself on the macroeconomic factors, then the industry factors and finally the company level factors. Following are the key industry level factors and how they impact the stocks.
Each industry has its own unique set of dynamics which impacts the eventual valuation of the company. For example, FMCG gets a P/E Ratio of 50 while steel gets a P/E of less than 20 and oil gets less than 10. Some of the key industry factors influencing valuation include, Type of Industry, Cyclicality of demand, Supply constraints, Agri dependence, Global dependence, Market Structure, Competition, Entry Barriers, Exit Barriers, Industrial policy, Labour policy, Cost of production, risk of Obsolescence, potential for Industry disruption, Pricing power, Predatory pricing, Scope for innovation, Tariff structure, Rate sensitivity and some other Key risk factors
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