As the stock trades ex-split today, shares of Indian Railway Catering & Tourism Corporation (IRCTC) were trading more than 13 percent higher at 933 per share on the BSE in early Thursday deals.
IRCTC shares were trading 12.56 percent higher on the BSE at Rs 929.50 apiece at 10:30 a.m. The shares were trading at above 12% on the National Stock Exchange (NSE).
The rise comes after the IRCTC stock fell dramatically for two consecutive sessions, prompting analysts to caution investors about purchasing the company's stock.
IRCTC announced its stock split plans while disclosing its first quarter earnings. The board approved a proposal for a 1:5 stock split, which would split 1 share with a face value of
Rs10 into 5 equity shares with a face value of $2 each.
Reason behind surge
IRCTC's stock soared today as the company's stock split went into effect. The record date for IRCTC's sub-division of Rs 10 equity shares into five Rs 2 equity shares was
fixed for October 29.
This explains why IRCTC's stock price has fallen despite the company's stock rallying dramatically on the stock exchanges.
Except for the last few sessions, IRCTC has had a great year on the stock markets, rewarding its investors with massive returns.
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The stock split is meant to benefit IRCTC enhance capital market liquidity and make its shares more affordable to small investors.
This is because a stock split raises a company's total number of equity shares by issuing additional shares to current shareholders.
It lowers the market price of each share while leaving market capitalization the same.
According to stock market analysts, the stock is likely to see robust demand over the next few sessions due to rising demand. Since it has a monopoly in the rail network market, the
company's growth potential remains high. IRCTC is also the only entity in charge of catering on trains and at key railway stations.
Fundamentally strong company
With IRCTC's monopoly fundamentally robust, the stock is also looking strong technically, as it is taking support near the recent breakthrough. Investors can purchase the stock since
the lower price makes it appear cheaper, generating demand for the stock.
Existing investors are advised to keep their equities.