Iam new to market,i have 20 shares of IOC at 650 purchased today ....will i get bonus 20 share or not,If i get then my total share will be 40 and at total cost price of 13000..means 50% profit is it so,plz anybody ans my query
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After IOC goes ex-bonus, i.e. after the bonus record date - even if the number of shares in your account double, the price of IOC share will come down by half. So buying today to try and get the bonus shares OR buying after IOC goes ex-bonus should effectively be the same!
If you bought IOC shares before Oct 30, you will be eligible for the bonus in the ratio 1:1. But that doesn`t give you 50% return, because after Oct 30 the share price will fall by half to reflect the new share capital.
Its true you will have in all 40 share (20 @ 650) plus (20@0) if you hold those 20 shares beyond ex-date (29th Oct. in this case) Thus you will have 40 shares for Rs 13000. But due to bonus adjustment price on 30th will be halved thus technically, assuming price reamins same 650 till 29th , your stock holding will be 40 shares and market price due to bonus adjustment will be 325. Thus ineffect total Market value on 30th would be 13000 only and hence no such illusionary profit as you think.
Just a small clarification needed. Pls answer.
Case1 : i have 5 share @ 650
Case2 : i have 10 shares @ 325 (after bonus gets declared)
so as of now both the holdings are = 3250/-
BUT as soon as it becomes 326, the holding becomes 3260/-......-In Case1, to achieve the same, the share price had to rise by Rs.2.....(as compared to just Re1 in case2)........I.e aftr bonus...we r getting some kind of a leverage effect, as the no. of shares hv doubled. Pls throw some light
Post ex-bonus date share price will be approx: 325 & your shares will become 40
post ex-bonus date it will be = 325*40 = 13000
Suggest: wait till ex-bonus date, look at market price post ex-bonus date if it is less than 325 buy anohter 100 shares and sell entire 140 shares@ avg price of 350-355 level within 1-2 weeks when bonus shares are credited to your account.
Its just a matter of perception mathematically Re. 1 rsie on 10 shares (ex bonus) is Rs 10 on investment of Rs 3250. And Rs 2 rise on cum bonus shares (5 here in this case) is Rs 10 again on investment of Rs 3250/-. Thus in both the cases apprecaiation is still Rs. 10 only thus no difference.
The only advantage that bonus has is it shows Managements confidence on serving enlarged equity base but there is no gaurantee. Besides due to fall in prices there might be better liquidity to the stock due to reduced acquition price as a perception.
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