How People make Actual money from Share Market

 Real Adv.Terms of Share Market

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Introduction: Decisions That Move the Market

The stock market doesn’t move randomly. Behind every sudden price increase, bonus announcement, or bear trend lies a strategic corporate decision. These boardroom calls, known as corporate actions define how a company rewards shareholders, raises funds, or reshapes its structure.

For investors, understanding corporate actions is not optional; it’s essential. They directly affect your portfolio value, stock prices, and even tax liabilities. Yet, most retail investors overlook them, focusing only on stock prices.

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1. Stock Split: Slicing the Pizza Without Changing Its Size

Imagine owning one pizza worth ₹1,000. Now, it’s cut into five equal slices, each worth ₹200. You still own the same total pizza, but now you have five slices instead of one. That is  stock split.

A stock split divides each share into multiple smaller shares to make them more affordable and increase liquidity.

How It Works

When a company announces a 1:5 split, each share is divided into five. If you owned 100 shares at ₹1,000 each before, post-split, you’ll own 500 shares at ₹200 each. The overall value (₹1,00,000) remains unchanged.

Why Companies Do It

• Affordability: Lower share prices attract small investors.
• Liquidity: More shares in circulation mean easier buying and selling.
• Market Psychology: A lower price often increases perceived affordability, encouraging participation.

Case Study: Reliance Industries

Reliance Industries, one of India’s biggest companies, has undertaken stock splits multiple times. Its last major split made its share price more accessible to retail investors, contributing to a broader investor base.

Investor Impact

Stock splits don’t change your total investment value but can trigger short-term demand, as investors flock to cheaper shares.

Example: A stock trading at ₹5,000 post a 1:5 split will trade around ₹1,000, leading to increased trading volume and retail participation.

Actionable Advice

When you hear of a stock split:

That means Price of that stock is going to drop, making stock affordable, Once the split is announced check it’s hype and make a decision if it will go up or no. Mostly it will go up.

-           But remember this is short term, Sell your stock after 1 or at most 2 days

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2. Bonus Shares: Free Shares That Aren’t Exactly Free

Who doesn’t love “free shares”? When a company issues bonus shares, it rewards shareholders by giving additional shares at no extra cost. But remember while the number of shares increases, the total value remains the same.

How It Works

If a company declares a 1:1 bonus, every shareholder gets one extra share for each share they already own.

Example: If you hold 100 shares of ₹500 each (₹50,000 total), after a 1:1 bonus, you’ll have 200 shares priced around ₹250 each. Your total investment value remains ₹50,000.

Why Companies Issue Bonus Shares

• To reward loyal investors without depleting cash reserves.
• To increase liquidity and shareholding participation.
• To project confidence only profitable companies can afford bonuses.

Real Example: Infosys

Infosys has issued multiple bonus shares in its journey, often coinciding with strong earnings performance. Its consistent history of rewarding shareholders strengthened investor trust, making it one of India’s most respected blue-chip stocks.

Investor Impact

Bonus shares increase your share count, often leading to a temporary price dip since the value adjusts. However, over the long term, they can boost wealth as the company grows.

Actionable Advice

• Treat bonus issues as a confidence signal from management.
• Be patient post-bonus dips often recover.
• Use them to reinvest or diversify your holdings strategically.

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3. Dividend: The Company’s Way of Saying “Thank You”

Dividends are the most direct reward for shareholders a portion of profits shared in cash or additional shares. They’re the heartbeat of income investing.

Types of Dividends

• Cash Dividend: Paid directly to your bank account.
• Stock Dividend: Additional shares instead of cash.
• Interim Dividend: Declared before year-end results.
• Final Dividend: Declared after annual financials are approved.

Example:

Suppose you own 1,000 shares of Infosys, and the company declares a ₹20 dividend. You’ll receive ₹20,000 directly in your bank account a neat bonus just for holding the stock.

Why Companies Pay Dividends

• To distribute excess profits.
• To attract long-term investors who prefer stable income streams.
• To signal financial health and confidence.

Case Study: ITC Limited

ITC is known for its consistent, generous dividend payouts. Its shareholders have earned both through steady appreciation and regular income, making it a popular choice among retirees.

Investor Impact

Dividends indicate company strength and stability. Firms that consistently pay dividends often have predictable cash flows and responsible management.

Actionable Advice

• Build a dividend portfolio for passive income.
• Reinvest dividends to maximize compounding.
• Focus on Dividend Yield (Dividend/Share Price) × 100 to compare opportunities.

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4. Buyback: When Companies Buy Their Own Shares

A buyback or share repurchase occurs when a company buys back its shares from existing shareholders, either through the open market or directly.

It’s like a company saying, “We believe our stock is undervalued, and we’re putting our money where our mouth is.”

Why Companies Do It

• Boost Share Value: Reduces supply, increasing demand and price.
• Improve EPS (Earnings Per Share): Fewer shares = higher EPS.
• Return Excess Cash: An alternative to paying dividends.

Example: TCS Buyback

Tata Consultancy Services has done multiple buybacks. Each time, it boosted shareholder returns and demonstrated management’s faith in the company’s growth.

A typical buyback might be at a premium price say ₹4,200 when the stock trades at ₹3,800 giving investors instant profit if they tender their shares.

Investor Impact

Buybacks are generally positive, showing confidence in future growth. However, excessive buybacks might mean the company lacks new investment opportunities.

Actionable Advice

• Participate in buybacks when offered at attractive premiums.
• Analyze if the company’s intent is genuine or merely to boost short-term valuations.
• Avoid speculative buyback plays focus on companies with sound fundamentals.

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5. Rights Issue: An Exclusive Offer for Existing Shareholders

A Rights Issue is when a company gives existing shareholders the right (not obligation) to buy more shares usually at a discounted price.

It’s a fundraising tool that rewards loyalty while helping the company raise capital without going to the public.

How It Works

If a company announces a 1:4 rights issue at ₹100 per share when the market price is ₹150, it means:

• For every 4 shares you hold, you can buy 1 more at ₹100.
• You can accept (buy more), renounce (sell your right), or ignore it.

Example: Reliance Industries (2020)

In 2020, Reliance announced India’s largest rights issue worth ₹53,000 crore, priced at ₹1,257 per share well below the market price. The offer was fully subscribed, reflecting strong investor confidence.

Investor Impact

Rights issues allow loyal investors to increase their stake at a discount. However, it’s crucial to assess why the company is raising funds for expansion or to cover debts?

Actionable Advice

• Always read the offer document carefully.
• Participate if the company’s long-term outlook is strong.
• Avoid if the issue is merely to patch up debt or mismanagement.

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6. Mergers & Acquisitions: The Corporate Marriages and Takeovers

When two companies combine (merger) or one buys another (acquisition), it reshapes the industry landscape. M&A activity can create powerhouses or disasters depending on execution.

Merger:

Two companies combine to form a new entity for synergy.
Example: HDFC Ltd and HDFC Bank merger in 2023 one of India’s largest. It created a financial superpower with improved efficiency and market reach.

Acquisition:

One company buys another, absorbing its business.
Example: Tata Motors acquiring Jaguar Land Rover (JLR) in 2008 a bold move that turned profitable despite initial skepticism.

Why Companies Merge or Acquire

• Expand Market Share
• Gain New Technology or Expertise
• Achieve Economies of Scale
• Enter New Markets

Investor Impact

Mergers and acquisitions often lead to sharp stock price movements:

• Target Company: Usually sees a price rise due to buyout premium.
• Acquiring Company: Might face a temporary drop due to integration costs or debt concerns.

Example: Zomato & Blinkit

Zomato’s acquisition of Blinkit was strategic diversifying into quick commerce. Initially criticized, the move began paying off as online grocery delivery demand surged.

Actionable Advice

• Invest in companies with strong acquisition strategies, not impulsive ones.
• Watch post-merger performance integration is the real test.
• Stay cautious around rumor-driven M&A news; confirm through official filings.

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How Corporate Actions Affect You as an Investor

Each corporate action directly influences your investment returns, but their effects vary:

Corporate Action	Impact on Investor	Cash Involved?	Typical Outcome
Stock Split	More shares, same value	No	Increased liquidity
Bonus Shares	Free shares, lower price per share	No	Reward signal
Dividend	Income from profit	Yes	Regular income
Buyback	Potential profit at premium	Yes	Reduced share count, higher EPS
Rights Issue	Option to buy at discount	Yes	Increased capital base
Merger/Acquisition	Revaluation of shares	May vary	Strategic growth or volatility

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Case Study: TCS – A Perfect Example of Balanced Corporate Actions

Tata Consultancy Services (TCS) has consistently rewarded shareholders through a blend of dividends, buybacks, and occasional bonuses.

• Buybacks: Routinely offered at premium rates.
• Dividends: Regular, often exceeding ₹40–₹50 per share annually.
• Stock Performance: Consistent growth over two decades.

Result? TCS shareholders enjoy both capital appreciation and income stability. This balance is a hallmark of well-managed corporate governance.

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The Behavioral Side: How Investors React

Corporate actions often test investor psychology.

• Stock splits spark excitement.
• Bonus issues create buzz.
• Buybacks fuel optimism.
• Rights issues raise questions.
• Mergers divide opinions.

Smart investors, however, don’t get swayed by noise. They analyze intent and outcome why the company took the decision and what it means long term.

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Key Takeaways: Corporate Actions Are Not Random

1.    Every corporate action has a motive reward, restructure, or raise funds.

2.    Always study why the company is doing it, not just what it’s doing.

3.    Check whether the action aligns with your investment horizon.

4.    Don’t rush to buy or sell based on announcements evaluate fundamentals first.

5.    Keep records actions affect taxation, cost basis, and future returns.

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Conclusion: The Power of Being Informed

Corporate actions are the language of corporate growth and shareholder reward. Whether it’s a bonus issue or a billion-dollar merger, each decision tells a story about where the company is heading.

Investors who understand these moves don’t just react they anticipate.
As Benjamin Graham once said, “An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return.”

Thorough analysis begins with understanding what companies are doing and why.

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Actionable Summary for Investors

• Track announcements regularly via NSE/BSE and company filings.
• Evaluate the motive growth, reward, or survival.
• Rebalance your portfolio post corporate actions to maintain allocation.
• Use corporate events to enhance long-term wealth not chase short-term hype