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5 Nifty companies announce bonus shares
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Engineering & construction giant Larsen & Toubro (L&T) and state-owned oil marketing company, Bharat Petroleum Corporation (BPCL) from the Nifty50 index in last week declared bonus shares in the ratio of 1:2 i.e. 1 new bonus equity share for every existing 2 equity shares.

Besides these two, total five companies including ICICI Bank, Wipro and Gail (India) from the index announced bonus shares thus far in the current calendar year 2017 (CY17). The number of companies from the Nifty50 index rewarding bonus shares to their shareholders is the highest in past 11 years.

Earlier, during the entire calendar year 2006, total seven companies - Cipla, Tata Consultancy Services (TCS), Infosys, Dr Reddy’s Laboratories, L&T, Oil and Natural Gas Corporation (ONGC) and HCL Technologies - from the benchmark index had issued bonus shares.

In 2015 and 2010, five companies from the Nifty 50 issued bonus shares, but Aurobindo Pharma in 2015 and Bajaj Auto and Zee Entertainment in 2010, were not part of the index in that particular year.
In last calendar year 2016, three companies - ONGC, BPCL and ITC - issued bonus shares, while in CY2015, Tech Mahindra, HCL Technologies, Infosys and Kotak Mahindra Bank had declared bonus shares.

Thus far in 2017, the equity markets have recorded its best ever start during past eight years, with the Nifty 50 index gaining 17.5% between January and May, 2017.

In 2009, the benchmark index had rallied 50% during the same period.

Meanwhile, in first five months of CY17, as many as 36 companies announced bonus to their equity shareholders, against 25 firms declared bonus shares in the same period of CY16. In CY13, total 114 companies announced bonus shares, followed by 49 in CY14, 59 in CY15 and 69 in CY16.
BPCL had issued bonus shares for the past two consecutive years and third time in five years. In May 2016 and in May 2014, the state-owned oil marketing companies declared bonus shares in the ratio of 1:1 i.e. one bonus shares for every one share held.

Market observers say bonus shares are being given to improve liquidity, besides rewarding the shareholders. After the issue, the stock price gets adjusted according to the bonus ratio. The total market value of the company, however, remains the same.

A bonus share issue also indicates that the company is confident about the business’s capacity to generate value for a larger number of investors. That apart, it also helps in boosting the trading volume at the bourses, as more number of shares are traded.