CASTROLIND goes ex-bonus in the ratio 1:1 on 21 Dec 2017. How does this affect my equity holdings and F&O positions?
Castrol India Ltd goes ex-bonus in the ratio 1:1 on 21 Dec 2017 i.e. 1 bonus share is issued at Rs.0 for every share held in the Demat account of all eligible shareholders.
Effect on Holdings:
When a bonus is issued, the share price reduces, in this case by a factor of 2. For example, if you held Castrol India shares at an average price of Rs.400, the price of each share on ex-date would be 400/2 = Rs.200. The price of each share gets divided by 2 and each share held in Demat will become 1 share at Rs.200 and 1 bonus share at Rs.0.
Please note that your investment value does not increase here. The share price reduces by half and you receive a new bonus share for the other half, thereby keeping your investment value the same.
Profit and Loss of holdings:
Until the bonus shares are credited to your Demat, your Castrol India holdings in Kite/Q will show an artificial drop in P&L of approximately 50%. Once the bonus shares are credited to your Demat, the P&L will be restored to its correct value.
You will receive an SMS from CDSL when the bonus shares are credited to your Demat, which could take up to 2 weeks.
Please follow these steps to update the bonus share price in Q backoffice.
Effect on F&O positions:
F&O lot sizes are multiplied by a factor of 2. The old lot size of 1400 will be revised to a new lot size of 2800. Option strike prices are divided by a factor of 2. A strike price of 400 becomes 200, 420 becomes 210 and so on.
The future and option prices are divided by a factor of 2 to maintain the same contract value as of before the bonus issue.
If you’re unable to see the revised market lot size on Kite, please do a hard refresh Ctrl + Shift + R and the new lot size will be updated on Kite.
This is the NSE Circular for F&O Adjustments in Castrol India.
To know more about corporate actions and its impact on stock prices, do read this Varsity chapter.