Few month ago, I had share of Bajaj Finance in my stocks portfolio. The share prices was at its peak and get close to 10K INR. I wanted to invest more but the price didn't allow me to afford. Recently, my friend suggested me to buy the shares as prices decreased to approx 900 INR which is within my reach. I was shell shocked But does that really worth buying?
Recently, Bajaj Finance completed a stock split and bonus issue The stock split was in a 1:2 ratio, meaning each existing share with a face value of Rs.2 was divided into two shares with a face value of Rs.1. A stock split is a corporate action where a company increases the number of its outstanding shares while proportionally decreasing the share price.
Many people like my friend get excited when they hear,
“A 10000 INR worth stock is now available at mere 900 INR after a split!”
It feels like the stock has become cheaper. But in reality, only the price has changed — not the value.
Think of it like a large pizza. Earlier, you had one big slice for 2000 INR. Now, it has been cut into 10 smaller slices priced at 200 INR each.
The crux is the pizza is still the same — just they get sliced differently.
That’s exactly how a stock split works. We may see more shares in our account, but the company’s actual value remains unchanged. Companies split their stock to make shares more accessible to individual investors and potentially increase trading volume. By making shares more affordable, stock splits can attract new investors, potentially leading to increased liquidity and trading volume.
So the next time someone says :
“Stock split happened — this is the right time to buy,” ..... take a moment, understand the fundamentals, and then make your decision.
Always invest with clarity, not just excitement.
In good faith - Peace!!
