What stock split means for your investments?

Weekly Markets..

1. Nifty 50- 10,244.40  2.72%▲

2. Nifty 500 - 8,403.40 2.53% ▲

Despite escalating cases of coronavirus and India-China border tensions, domestic markets closed on a positive note on Friday, led by gains in financials and index heavyweight RIL.

All sectors except IT and Metal closed in green. Bajaj Finerv, Tata Motors, Bharti Infratel and others led the gains, whereas HCL Tech, ITC and others were the top laggards.

Recently, Eicher Motors declared a 10-for-1 stock split. What does a stock split mean anyway and should you panic as a shareholder of the company? Does this mean that the value of your shares in Eicher Motors will fall and you’ll incur a loss? Well, unless you share something with someone wholeheartedly, a split would definitely seem like a loss. But a stock split generally means good news.

Simply put, a stock split is whe a company divides its outstanding share capital into a higher number of shares while lowering the price of an individual share. Ergo, it neither changes the value of a company's market capitalization nor that of your investment, but decreases the value of an individual share. Consider Eicher Motors’ example. The company will now offer 10 new shares for every existing share. This way, Eicher Motors will add more shares to its capital but the face value of each share will decrease.

Fortunately, your portfolio will not be impacted unless the value of the stock appreciates after the split due to high demand, in which case, you are at the winning end. For the company, a stock split offers greater liquidity by decreasing the value of its expensive share and making it affordable for potential investors to buy. To conclude, a stock split generally means good for your portfolio. So, worry not but investigate the reason for a stock split before liquidating your position.

GOOD NEWS !!

Keeper of promise..

On Fri, Reliance Industries Limited hit a record high while also crossing ₹ 10.5 lakh crore in terms of market capitalisation. The development came after Mukesh Ambani, RIL's Chairman, announced that the company delivered the promise to be net debt-free much before the schedule. RIL has raised ₹ 1.68 lakh crore in less than 2 months by way of stake sales and a rights issue

 

Gold to the rescue...

Muthoot Finance Ltd hit an all-time high after declaring a 59% growth in Q4 2020's net profit y-o-y. The south Indian lender’s assets under management (AUM) also grew by 22% y-o-y. During Q4 2020, the company's gold loan portfolio hiked to ₹ 41,611 crore. Further, a 15% drop in provisions due to a fall in bad assets may have boosted the lender's net profit. Muthoot also declared that it is well-positioned in terms of current provisions, which are enough to cover risks arising from the pandemic.

BAD NEWS !!

Tumble-rumble 

MOIL plunged after declaring a profit after tax of ₹ 13 cr in its Q4 earnings, a 90% decline from the same period a year ago. Its net profit slumped 90.4% to ₹ 13.47 crore and net sales to ₹ 248.66, a 43% drop y-o-y. Still, MOIL's board has recommended a final dividend of ₹ 3 per share for the year ended March 2020. Notably, the Government of India has a 53.843% stake in MOIL as of 31st March 2020.

Disclaimer: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. It is for educational purposes only.

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