CDSL Shares Price: 48% correction on NSE today- here's why

Today, shares of Central Depository Services Limited (CDSL) are trading higher as the company’s bonus issue takes effect, resulting in CDSL share price is 6% up today.

Today  is ex bonus date for CDSL resulting in CDSL price adjusted today. Now, again a question arises, what next for CDSL? Is this still a buy or avoid?

So, in this blog we are going to discuss future growth prospect for CDSL, challenges, and should you buy at this level or not? So, lets deep dive into it.

What is the Bonus Issue All About?

CDSL recently announced a bonus issue in a 1:1 ratio. This means that for every share a shareholder owns, they will receive one additional share for free. To qualify for this bonus, investors needed to have CDSL shares in their demat accounts by the end of trading on Thursday, August 22. The bonus issue was approved by shareholders at the company’s Annual General Meeting (AGM) last week.

What happened to share after ex Bonus?

Let's simplify the explanation of CDSL's 1:1 bonus share adjustment.

When a company announces a 1:1 bonus, it means for every 1 share you own, you get 1 additional share for free. However, this also affects the share price.

Here’s how it works:

- Suppose you bought 1 share of CDSL at ₹2900.  

- After the 1:1 bonus, you receive an additional share, so now you have 2 shares.  

- Your total investment is still ₹2900.  

Since you now have 2 shares instead of 1, the stock price adjusts accordingly to keep your total investment the same. In this case:

- Original Price = ₹2900 per share  

• After the 1:1 bonus, the price is adjusted to ₹1450 per share (₹2900 / 2).  

Now, you have 2 shares priced at ₹1450 each, totaling ₹2900. Your investment value remains unchanged, but you have more shares.

How Are CDSL Shares Performing?

Ahead of the record date, CDSL shares have been on a strong upward trend. The stock has gained in 10 out of the last 12 trading sessions, showcasing strong demand and investor confidence. Currently, CDSL shares are trading 5.6% higher at ₹1,530. Over the past month, the stock has surged by 28%, highlighting its impressive performance.

CDSL’s Market Share is Growing

A recent report by Motilal Oswal, a leading brokerage firm, highlighted that CDSL continues to gain market share in the number of demat accounts. As of July 2024, the total number of demat accounts has increased to 167 million. CDSL holds a dominant position with a 77% market share in total demat accounts. Even more impressive, CDSL’s market share in incremental (new) demat accounts has grown to 91% in July from 90% in June.

In contrast, NSDL, CDSL’s main competitor, has lost significant ground. NSDL saw a decline of 420 basis points in total market share and 510 basis points in incremental market share.

CDSL Income Statements Last 5 Years 

Strong sales and profit growth is justifying its share price.

What’s Next for CDSL?

Predicting CDSL's future stock performance is challenging, but several factors suggest potential growth:

1. Strong Market Position: CDSL holds a 77% market share in Demat accounts, with significant growth in new accounts. This dominance suggests a solid foundation for future expansion.

2. Positive Investor Sentiment: The stock's recent 28% gain and positive response to the bonus issue indicate strong investor confidence.

3. Industry Growth: Increasing retail investor participation and digitalization in financial services could drive further growth for CDSL.

4. Strong Demand: Even after bonus, investors sentiment looks positive as we can see in share price today. This indicates the huge demand for this stock among investors.  

However, investors should consider potential risks such as market volatility, regulatory changes, and competition.

Risks:

Market Volatility: Stock prices can fluctuate.

Regulatory Changes: Could impact operations.

Competition: Changes in the competitive landscape may affect growth. 

Conclusion:

If you are optimistic about CDSL's growth and can handle some risk, it could be a good buy. Always consider doing further research or consulting a financial advisor.

Disclaimer: This Blog is for information purposes only and doesn’t advise any reader to make any type of investment. Always consult your Financial Consultant before investing.