Why a stock prize fall after issue of bonus shares

What is bonus share in stock market ?

Bonus shares are additional shares given to the share holder without any additional cost based upon the number of shares that he owns in the specific stock. For example, if an Investor XXX owns 50 stocks in a Company YYY and if that company declares a bonus of 1:1 then he will get an additional 50 stocks of that company at no extra cost. So he will have a total of 100 shares after ex-bonus date. Similarly if the company declares 4:1 bonus then he will get additional 200 shares at no extra cost and his total holding will increase to 250 in this case.

When / Why does a company issue bonus ?

Companies start accumulating a part of their profit and build up their reserves. After sometime, the reserves increase and if the company wants to convert this reserved money to market capital then they issue bonus to share holders.

Bonus shares are issued to increase the companies equity base and retail participation. When the value of the stock becomes high, it makes it difficult for ordinary people to buy the stock at higher prize thus there will be less new investors who will be investing in their stock. Reduced prize after bonus attracks new investors to invest in their company.

Why does stock prize fall after bonus ?

Bonus issue increases the total number of shares for that particular company in the market.  For example if a company has 100,000 shares and it declares 1:1 bonus then its number of shares increase to 200,000. This is refered to as dilution in the equity. Now the earnings of that company has to be shared with that much more additional shares. The profit of that companybmay remain same but since the number of shares increased, the EPS (Earnings Per Share) will decline. Theoritically if the EPS declines, the stock prize of that company should also decline proportionately.  But in reality, it may / may not happen. Even if the stock prize declines for a short term, it will eventually increase in long run because bonus issue will liquidate its equity hence there will be more buy and sell. Bonus issue also sends a signal that the company is ready and is in a position to service its large equity.

What is the difference between split and bonus ?

A bonus is a free additional share. A stock split is the same share split into two. So, if you own a company share and if it announces bonus then you have reasons to celebrate. But dont celebrate when they split because it is just a technical change in the face value of the stock. But if you want to buy more shares, it is a good news for you :-) because now, you will be able to afford them or at least get them cheaper.

How to register for CDSL easi

I had a hard time and found it difficult to register for CDSL easi for first time. So, i thought if i put the detailed information for registering for CDSL easi, it will be very useful for the new one’s who are registering for CDSL for the first time. Please find the detailed info below.

What is CDSL easi ??

CDSL easi (electronic access to securities information) is a convenient, easy to operate internet based facility, which allows registered Beneficial Owners (BOs) & Clearing Members (CMs) to access their demat account through the internet to check the details of their holdings and/or transactions,anytime anywhere, through CDSL’s website or mobile application.

What is BOID / How to get BOID in CDSL ??

BO ID is a Beneficial Owner ID. It is a 16 digit number. To get BOID, combine both DP ID and Client ID (each 8 digit) which you can get from CDSL / Broker statements.

How to register for CDSL easi ??

We can register for CDSL easi from both the website and mobile application. Registering from mobile application is very easy. To register, Download and install the mobile app. After installation, open the app and click on “easi Registeration” option. It asks for BOID and password. For BOID, Find the DP ID and Client ID from demat statement and form the BOID by combaining both.  Password is usually your pan number (in Capital letters) followed by your dare of birth as per records (DDMM). Enter the BOID, Password and click NEXT. OTP will be sent to your registered mobile number. Enter the same and choose your username and other details and submit. You have successfully registered for CDSL easi :-).

Once your registration is complete, you can login from both website and mobile application.

CDSL easi login : Click Here

Benefits of CDSL easi:

  • Viewing and printing details of holdings and/or transactions for last 7 days in their account.
  • Viewing and printing the valuation of holdings in their demat account based on the previous day’s closing price on BSE.
  • Viewing multiple demat accounts through a single login id.
  • Monitoring corporate announcements related to the securities, held in their demat account. A BO also has the additional option to add upto 25 ISINs not held in their demat account, but wishes to monitor corporate announcements for such ISINs.

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