If theoretically asked impact of stock split, it should have no impact but it does have a psychological effect as stock price comes down and it reaches in the reach of common retail investor. A stock split lowers the share value and increases the number of outstanding shares to the extent of the split, thereby boosting liquidity and making high priced stocks accessible to retail players and thus in turn volume increases.
Along with four Tata group companies – Tata Motors, Bharat Heavy Electricals (Bhel), HDFC Bank, Cox & Kings, VA Tech, Walchand, Tata Power, Titan Industries and Rallis India – a total of 21 companies have announced plans to split face value of their company’s equity shares into lower denominations since April 1, 2011.
Just remember that stock split effect is just temporary in nature as at the end of the day, the company’s business fundamentals are going to be the true driver of the stock’s value and future direction and thus call on a stock based on stock split can be only taken for a very brief period when the effect is felt on price due to increased volume. ONGC has underperformed the market, falling 5% after its stock split and bonus issue, compared with a 1.3% rise in the benchmark index Sensex, due to the burden of subsidy sharing. Thus base your investment decision with the advice of a share tips expert only to get best returns in stock market.
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