A stock split is a corporate action through which the company increases the number of shares its investors hold by dividing each existing share into multiple shares. As a result, the price of each share decreases proportionately, while the total value of your investment remains the same. 

For example, in a 1:2 stock split, every 1 share becomes 2 shares. Here's what happens when a company announces a 1:2 stock split: 

If you owned 100 shares priced at ₹200 each before the split, you would own 200 shares priced at ₹100 each after the split. The total value of your investment would still be ₹20,000 – so you don’t really gain or lose anything after the split.

What actually changes in a stock split?

•    You own more shares than before. 

•    The price per share comes down proportionally. 

•    The face value (the number used for accounting) also gets adjusted in the same ratio.

What does NOT change?

•    The total value of your investment stays the same right after the split. 

•    The company’s market capitalisations and value don’t change because of the split. 

•    The company’s fundamentals like earnings, profits, PE ratio and its business performance remain effectively unchanged. 

Important dates to know:

•    Record date: The record date is the day the company checks its records to decide who gets the split shares. If your shares are in your demat account on this date, you’ll receive the extra shares from the split. 

•    Ex-split date: This is the date from which the stock starts trading at the new split-adjusted price. From this day onwards, the price you see on the market already reflects the split. 

•    Credit date: This is the date when the extra shares are added to your demat account. It usually happens a couple of working days after the record date. 

Key things to remember in a stock split:

•    You don’t need to take any action. If you hold the stock on the record date, the split will be processed automatically, and the new shares will be credited to your demat account. 

•    Your demat balance and your holdings on app may take a short time to reflect the additional shares. During this window, you may still see your old quantity, and the new shares will appear once they are credited. You can trade only the shares that are already visible in your account. 

•    The stock price may show a huge drop on ex-split date. It is nothing to worry about. The price drop happened because now the number of shares increased and your holding value is still the same. 

•    A stock split does not make you richer. It only increases the number of shares you own while reducing the price per share, so the total value of your investment stays the same. 

•    The company itself doesn’t become more or less valuable because of a split. Only the share structure changes, not the business performance or fundamentals. 

•    A lower share price after a split doesn’t mean the stock is “cheaper” in value terms. It’s the same investment, just divided into more parts. So always evaluate the company based on its business, not the price tag alone. 

•    You can learn more about stock split, how they work and its impact on a company here.