Nominal Value, also known as face value or par value, is a fundamental concept in the financial and stock market world. It represents the original value of a security or asset as stated by the issuer at the time of issuance. For stocks, the nominal value is the price printed on the share certificate, which does not change with market fluctuations. In the case of bonds, it indicates the amount the issuer promises to repay at maturity.

Understanding nominal value is crucial for investors as it forms the basis for calculating dividends and interest payments. For equity shares, dividends are often declared as a percentage of the nominal value. For example, a 10% dividend on a share with a nominal value of ?10 means an investor receives ?1 per share. Similarly, for bonds, the nominal value determines the coupon payment and the principal repayment at maturity.

It is important to differentiate nominal value from market value. While nominal value remains constant, market value fluctuates according to demand and supply in the stock market, investor sentiment, and company performance. A stock may trade at a price higher or lower than its nominal value, but the nominal value continues to be used for accounting purposes and regulatory compliance.

Companies also use nominal value to issue new shares or during stock splits. For instance, if a company performs a stock split, it may reduce the nominal value per share while increasing the number of shares, ensuring the total capital remains unchanged. This is a common strategy to make shares more affordable for retail investors.

In conclusion, nominal value is a critical financial metric that aids in calculating dividends, understanding company capital structure, and maintaining compliance with regulatory norms. While it does not reflect the market price, its role in corporate finance, accounting, and investment calculations makes it an essential concept for both new and experienced investors.