Many investors who bought shares of Bajaj Finserv are worried today. Worryingly, this stock is showing a decline of up to 90%. But, you need not worry, because this is not a fall but a stock split. Some call it bonus share and some call it stock split. But both are same.
Nitin Kamat, co-founder of Zerodha, has given a very good example to clear people’s dilemma about this. Bonus or split is just like 2 chocolates of 50gm each instead of one chocolate of 100gm, he tweeted. Overall there is no difference.
Don’t be afraid and don’t be greedy.
Non-banking finance company (NBFC) Bajaj Finserv’s share split and bonus record date is September 14. Today its shares are trading at a split price. For one share investors will get 10 shares but the rate of these shares will also be 10 times lower. Nitin Kamat tweeted that every time there is a stock split, there is panic (fear) or greed (greed) among investors. Those who have it start worrying about lowering the rate, those who don’t think about taking it at a lower rate.
Today, Tuesday at 12:51 PM, a share of Bajaj Finserv was trading at Rs 1,786 on the NSE, while yesterday the same share closed at Rs 17,138.05. However, after the announcement of bonus share or dividend, the share of Bajaj Finserv saw a significant rise. Even after the split today, the stock is trading above its opening price.
So what should Bajaj Finsar investors do?
Investors should understand that bonus issue and stock split only increases the number of shares and does not mean that the stock has become cheap. It has no impact on the value of your investment or the company’s principles. Earlier, if there were 100 shares of this company in the market, now the shares will be more and the price will be lower. The company’s value will remain the same.
For example, suppose you own a stock that has a price of Rs.10 and a share price of Rs.500. If it splits 2:1, the face value will be Rs 5 and the share price will come to Rs 250. If you had bought 10 shares for Rs 500, you would now have 20 shares worth Rs 250. That means your investment was Rs 5000 earlier and still is.
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