Shares of the Life Insurance Corporation of India (LIC) appeared to fall nearly 50% [1] in early trade after turning ex-bonus.
The price movement may cause alarm for retail investors seeing a sudden drop in their portfolio values, but the decline is a technical adjustment rather than a loss of market value.
LIC implemented its first-ever bonus issue with a 1:1 ratio [2], meaning shareholders receive one additional share for every share they already hold. Because the number of shares outstanding has doubled, the price per share is proportionally halved to maintain the same total market capitalization.
Market data shows the share price adjusted from approximately Rs 830 to about Rs 416 [1]. This mathematical correction ensures that the total value of an investor's holding remains unchanged despite the lower price per unit.
Some trading applications may display a more significant decline, with some portfolios showing a fall of up to 55% [3]. These discrepancies often occur due to how different platforms update their data during the transition to the ex-bonus record date.
The Indian stock market, including the National Stock Exchange and Bombay Stock Exchange, handles these adjustments regularly for various listed companies. The apparent crash is a standard result of the bonus issue process, a corporate action that increases liquidity without changing the underlying value of the company [1].
“The apparent drop does not reflect a loss in the company’s market value.”
A bonus issue is a way for a company to reward shareholders and increase the liquidity of its stock by making shares more affordable for new buyers. While the per-share price drops, the investor's total stake remains the same because they now own twice as many shares. The temporary volatility or reporting errors in trading apps are common during ex-bonus transitions and do not indicate a fundamental shift in LIC's financial health.
