What do I need to know about positions in stocks that go ex-bonus?
Godrej Consumer Products had issued a bonus with ratio 1:1, i.e one new stock at Rs 0 for ever stock you held. The stock is going ex-bonus today. So if you held 1 share with buying price of Rs 1900, you will have 2 shares with total value of Rs 1900. The bonus share might take upto two weeks to be credited in your demat account. To adjust for the bonus the stock price will drop, in this case 50% since it is a 1:1 bonus.
ps: a popular notion is that bonus suddenly adds value to the stock holder, which is not true. Instead of holding 1 share at 1950, the person will hold 2 at 975. Bonus is usually done by companies to bring down the price of stock, and hence increasing liquidity. Check this module on how corporate actions affect stock prices.
This will affect both your holdings and open F&O positions.
Holdings
Until the new bonus stock is credited to your demat, your holdings P&L will not be exact. You will see an artificial drop in P&L. For example, if you held 1 share with buy average of Rs 1900, since the stock is trading after ex-bonus at 975, it will show a 50% loss. But this will get corrected as soon as the bonus stock is credited to your demat at average price of 0, so then you will have 2 shares with buy average of 975.
F&O
All positions will get adjusted as per this circular https://www.nseindia.com/content/circulars/FAOP35162.pdf. Lot size goes upto 800 (double) and strike prices on options reduce to half.
Also,stock prices on exchange website will show post adjusted % gain or loss. So NSE website might show stock price down 1% if stock is at 965 (1% below post adjusted price of 975). Kite and other trading platforms will show it as down 51%, based on yesterdays closing price and current price.
Also if you are using Kite platform and not able to see the new lot size or strike price, make sure to force refresh the browser (Ctrl+Shift+R).
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