Stock Split is a corporate action where a company divides its existing shares into multiple shares to increase the liquidity of its stock. Although the number of shares increases, the overall market capitalization and the investor’s total holding value remain unchanged. This move primarily makes the stock more affordable for retail investors and improves market participation.

For example, in a 2-for-1 stock split, every existing share is split into two. If an investor holds 100 shares priced at _1,000 each, post-split they will own 200 shares priced at _500 each. The total investment value remains _1,00,000, but the stock becomes more accessible for new investors.

Companies generally announce a stock split when their share price has risen significantly, making it less attractive for small investors to buy. This strategy often aims to boost trading volume, liquidity, and retail participation without changing the company’s fundamentals. It also reflects management’s confidence in the company’s long-term growth potential.

There are different types of splits, such as a forward split (increasing shares) and a reverse split (reducing shares). While a forward split is common in growing companies, a reverse split is often used by companies looking to increase their share price and improve market perception.

Investors should note that a stock split does not impact the company’s intrinsic value, earnings, or financial position. However, it can influence short-term market sentiment. It’s important to evaluate the company’s fundamentals, growth prospects, and management intent before making investment decisions based on a stock split announcement.

In summary, a stock split enhances liquidity and accessibility, helping companies align their share price with investor interest while maintaining the same overall market value.