Splits wide shut in bear-hit 2008

MUMBAI : At times, there is a positive side to bear markets. Promoters stop resorting to shenanigans that are in vogue when the market is booming. With the Sensex yet to recover from the slide that began in January this year, the number of stock splits too have fallen sharply.

Stock splits involve reducing the face value of a stock from Rs 10 to smaller denominations like Rs 2 or Rs 5, in a bid to proportionately reduce the listed price of a scrip on the exchange, and to make it more accessible to a larger investing community base.

However, with the BSE Mid-cap index declining by a whopping 43% from its peak in the first week of January 2008 to 5778 currently, and the Sensex at 14,900, also lower by 28.4% from its peak, analysts point out that there is little pressure on the managements of India Inc to make their respective stocks more accessible to the investor community.

In fact, some market watchers make snide remarks that stocks are already quoting at a fraction of their earlier highs, even without a stock split.

Says Motilal Oswal Financial Services founder and managing director Ramdeo Agrawal: “At the moment, investors are more concerned about the companies’ focus on improving their earnings and operating margins, rather than cosmetic changes like stock splits.”