Eicher Motors shares jump 10% as 10-for-1 stock split comes into effect

Eicher Motors surged as much as 10 per cent (intra-day) to Rs 2,389 on Monday after the 10-for-1 sub-division of its shares took effect. 

The stock, however, gave up most gains to end at Rs 2,177, up 0.23 per cent. The company on May 25 had anno­unced the stock split to make the stock more affordable for the small retail investors and increase liquidity. 

Prior to the stock split, the stock traded at more than Rs 20,000 apiece, making it one of the most high-valued stocks in absolute terms. 

Other popular stocks with high denomination in the domestic markets include Page Industries, shares of which last closed at Rs 20,892, and MRF, which ended at Rs 59,777 on Monday. 

Stock splits is a common corporate action followed by India Inc to reduce the denomination of their stock and improve their market liquidity. 

 

 

This year, close to 20 companies have announced stock splits, while last year, about 30 of them had sub-divided their shares. Often it is seen that share prices rally after stock split as new investors flock to the counter. 

However, experts warn that stock splits don’t change the fundamentals or financial metrics of a company. They advise investors against buying a stock purely based on the stock split news. To explain, a 2-for-1 stock split doubles the number of outstanding shares of a company but also halves its price. Not just India, globally also top technology giants, Apple and Telsa, have announced similar stock splits.

Apple shares trade at around $500 a dollar, while that of Tesla quote above $2,000. Tesla shares will be split into five, while Apple stock will see a 4-for-1 split. Retail brokerages in the US, such as Robinhood, also allow investors to buy fractional shares.