PC Jeweller going ex-bonus with 1:1 ratio. Please explain how it affects with examples on both my holdings and F&O positions average prices.
PC Jeweller declared a 1:1 bonus, and stock is going ex-bonus on 6th July, 2017, i.e. 1 bonus share 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 drops, in this case by a factor of 2. So if you held PC Jeweller shares at an average price of Rs.500, the price of each share after bonus would adjust to 500/2 = Rs.250. You’ll have 1 share at Rs.250 and 1 share at Rs.0, maintaining your overall investment value.
Please note that a bonus issue only increases liquidity and not your investment value.
Until the bonus shares are credited to your Demat, your Holdings will show a drop in P&L of approximately 50%. Once the bonus shares are credited at an avg price of Rs.0, your P&L will be restored to its correct value.
You will receive an SMS from CDSL when your bonus shares are credited to your Demat which could take upto 2 weeks.
How to add bonus share price in Q backoffice.
Effect on F&O positions:
Option strike prices are divided by the factor of 2. A strike price of 540 becomes 270, 560 becomes 275 and so on. F&O lot sizes are multiplied by the factor of 2. The old lot size of 1500 is revised to a new market lot of 3000.
The future and option prices are divided by the 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.
NSE Circular for F&O Adjustments in PC Jeweller.
To know more about corporate actions and its impact on stock prices, do read this Varsity article.