What do record date and ex-date mean?
Record Date: The record
date is the cutoff date set by a company to determine which shareholders are
eligible for specific corporate actions, such as receiving dividends, rights
shares, or bonus shares. If you own shares in your account on the record date,
you're eligible for these benefits.
Ex-Date: The ex-date, or ex-dividend date, is when a stock starts trading
without the right to receive a declared dividend or other benefits. On this
day, the stock's price usually drops by the amount of the dividend or benefit.
Example Scenario:
1.
Record Date/Ex-Date Timing:
o If the
record date (or ex-date) for a corporate action is set for Wednesday, you need
to buy the shares by Tuesday to be eligible for the benefits.
o The stock
will trade with the benefits (e.g., with dividends) until the end of Tuesday.
o On
Wednesday, the stock will trade without the benefits (ex-dividend), and its
price typically drops by the benefit amount.
2.
Stock Price Adjustment:
o For
example, if Stock A announces a ₹10 dividend with a record date on Wednesday,
and its price is ₹500 on Tuesday:
§ On Tuesday,
it trades at ₹500 with the dividend benefit.
§ On
Wednesday (the ex-date), the stock price will drop by ₹10, reflecting the
dividend, making the new price ₹490.
Understanding these dates will help
you better plan your investments and know when you'll be eligible for certain
corporate benefits.
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