Zerodha founder’s advice to retail investors on IRCTC stock split

“We now have a nudge to notify users. IRCTC Partition has taken place. A stock split just increases the number of shares and does not mean the stock has become cheaper. It has no impact on the fundamentals of the company,” said the founder of Zerodha.

Recently, Zerodha introduced a new feature called Nudge on its trading platform, which will help traders to learn from their mistakes.

What does IRCTC stock split mean for investors?

If you had 1 share of IRCTC at a price of ₹4500, now you will have 5 shares ₹900 each—4 new shares will be credited in 4 days after the stock split. It doesn’t matter in terms of the value of the stock. It’s not cheap just because the price is low.

What is Stock Split?

A stock split increases the number of shares outstanding by issuing more shares to existing shareholders. A stock split reduces the market value of individual shares, however, the market capitalization of the company does not change.

“Corporate actions like stock split, bonus, rights issue, increase the number of shares in the company and hence reduce the stock price. It doesn’t matter the price. It’s like 1 chocolate out of 100 grams or 5 out of 20 grams, the price remains the same,” Nithin Kamath said.

How does a stock split affect the price of a stock?

In most of the cases, it is seen that the stock split results in an increase in the price of the stock. This is because since the stock now appears to be cheaper, there is more demand from small and retail investors, which leads to an increase in the price. This makes it a positive approach to invest in such companies as the stock price which earlier seemed very high, becomes available at a good price.

While announcing its first quarter earnings, IRCTC had unveiled its stock split plans as the board approved a 1:5 stock split proposal.