How do corporate actions like bonus issues, dividends and stock splits impact your demat account? MintGenie explains
Mergers, acquisitions, stock splits, dividends, and bonuses have the potential to influence share prices significantly. Market participants and investors must comprehend the interplay between business activities and derivatives markets to effectively manage their positions and anticipate shifts in futures and options markets.
A corporate action refers to a strategic decision made by a company that directly impacts the value of its shareholders' investments. In essence, it is an event that brings about a notable change within the company, affecting its stakeholders. These actions can take various forms, ranging from monetary, such as dividends, to non-monetary, such as stock splits or rights issues. While certain corporate activities may have a minor impact on stock prices, others, particularly those of significant magnitude, can result in substantial shifts in value.
Corporate actions can have various impacts on your demat account, depending on the type of action and your holdings. Here are some common corporate actions and their potential impacts:
Dividends: If a company declares dividends, the amount will be credited to your demat account if you hold the stock on the record date. This will increase the cash balance in your account.
Bonus Issue: In a bonus issue, additional shares are allotted to existing shareholders at no cost, based on their current holdings. These bonus shares will be credited to your demat account, increasing the number of shares you hold.
Stock Splits: In a stock split, the number of shares outstanding increases, and the price per share decreases proportionally. Your holdings will be adjusted accordingly, with the number of shares increasing and the price per share decreasing.
Rights Issue: In a
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