How does the split shares calculation works at 5paisa?
The calculation for stock splits involves dividing existing shares into multiple shares, usually with the aim of increasing the liquidity of the stock and making it more affordable for investors. Here's how the process typically works:
Ratio Announcement: The company announces the stock split ratio, such as 2-for-1, 3-for-1, etc. This ratio indicates how many new shares you will receive for each existing share you own.
Calculation: Let's say you own 100 shares of a company that announces a 2-for-1 stock split. In this case, for every one share you currently own, you will receive two new shares. So, with your 100 shares, you will receive 200 new shares.
Adjustment of Price: Along with the split, the stock price is adjusted proportionally. If the stock was trading at ₹100 per share before the split, it might adjust to ₹50 per share after a 2-for-1 split.
Total Value: While the number of shares you own increases, the value of your investment remains the same. In the above example, if you had 100 shares worth ₹10,000 before the split, you would now have 200 shares worth ₹10,000 after the split.
Demat Account: The new split-adjusted shares are credited to your Demat account. For instance, if you had 100 shares before the split, you will now see 200 shares in your account after the split.
Example:
It's important to note that the market value of the stock and your investment doesn't change due to a stock split; only the number of shares and the share price are adjusted. Stock splits are often done to make the stock more attractive to investors and increase trading activity.
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