Face Value vs Market Value: Why a ₹10 Share Trades at ₹500
The short answer
Face value is an accounting figure fixed when a share is issued — commonly ₹10, ₹5, ₹2 or ₹1 — used for company-law purposes such as declaring dividends and computing share capital. Market value is what buyers and sellers are willing to trade the share at today. They differ because face value never changes with the business while market price reflects what the company has become: a ₹10 face-value share of a company that has grown its profits for twenty years can trade at ₹500 without anything being unusual.
New investors often expect the number printed on a share to have something to do with what the share is worth. It does not, and the gap between the two is not an anomaly — it is how the system is designed.
Getting these three numbers straight also protects you from the most common misreading in Indian markets, which is a dividend quoted as a percentage of face value.
Face value
Face value, also called par value or nominal value, is set by the company when shares are issued and recorded in its capital structure. Indian companies commonly use ₹10, ₹5, ₹2 or ₹1.
It exists for legal and accounting reasons. Share capital on the balance sheet is the number of shares multiplied by face value; dividends are often declared as a percentage of it; and a stock split is defined as a reduction in it. It is deliberately a fixed reference point, not a valuation.
It does not change when the business does. A company can multiply its profits tenfold and its face value stays exactly where it was.
Market value
Market value — the market price — is what the share last traded at on the exchange. It is set by what buyers are willing to pay and sellers are willing to accept, continuously through the trading session.
It reflects everything the market currently believes about the company: its profits, its growth, its debt, its industry, and the general mood of the market that day. This is the number that matters to you, because it is what you pay and what you receive.
Book value, briefly
There is a third number worth knowing. Book value per share is the company's net assets — assets minus liabilities — divided by the number of shares. It is what the accounts say the shareholders' stake is worth.
Book value sits between the other two conceptually: unlike face value it does change as the business accumulates profits, and unlike market value it comes from the accounts rather than from opinion. Market price can trade above or below book value, sometimes by a lot.
Where this trips people up: dividends
Indian companies typically announce dividends as a percentage of face value. "A 200% dividend" on a ₹10 face value means ₹20 per share.
If that share trades at ₹500, the investor receives ₹20 on an investment of ₹500 — a dividend yield of 4%, not 200%. The announced percentage and the investor's actual return are completely different numbers, and mistaking one for the other has been the basis of a great deal of confusion.
The rule is simple: a dividend percentage announced by a company is a percentage of face value. Your return is the rupee dividend measured against the market price you paid.
What a stock split actually changes
A stock split reduces the face value and increases the number of shares in proportion. A ₹10 face value split into five parts becomes ₹2, and one share becomes five.
The market price adjusts in the same proportion — a ₹500 share becomes five shares of about ₹100. The value of your holding is unchanged; you own more shares each worth proportionally less. Nothing about the business changed, which is why a split is not, by itself, good or bad news.
What face value does not tell you
It does not tell you whether a share is cheap or expensive. Two companies with the same ₹10 face value can trade at ₹30 and ₹3,000, and neither figure says anything about value.
It does not indicate quality, size or safety. A low face value is not a discount and a high one is not a premium — most Indian companies simply chose ₹10 or ₹1 at issue and never revisited it except through a split.
It also has no bearing on your returns, which come entirely from the market price changing and from dividends received.
How this connects to mutual funds
A mutual fund has a parallel that causes the same confusion. Scheme units are typically issued at ₹10 at launch, and NAV moves from there — so a long-running scheme can have an NAV of ₹600 while a new one sits at ₹10.40.
Just as with face value, the level of the NAV tells you nothing about whether a scheme is cheap. Two schemes holding identical portfolios deliver identical percentage returns whatever their NAVs happen to be.
Key takeaways
- Face value is fixed at issue for accounting and company-law purposes; it is not what a share is worth.
- Market value is what buyers and sellers trade at today, and it is the only one that affects your return.
- Book value per share comes from the accounts: net assets divided by shares outstanding.
- A ₹10 face-value share trading at ₹500 is entirely normal — the face value never moved.
- A dividend announced as a percentage is a percentage of face value, not of your investment.
- A stock split reduces face value and price proportionally; your holding's value does not change.
- A mutual fund's NAV level works the same way and says nothing about whether it is cheap.
Put this to work on your own numbers
- CAGR Calculator
Annualise the change in a market price between two dates.
Frequently asked questions
Sources and editorial review
Checked against the primary sources below on . Scheme terms, tax rules and regulatory requirements change — confirm the current position before acting on anything here.
- SEBI Investor Website
SEBI's investor education material on shares, corporate actions and stock splits.
- NSE India
The exchange's disclosures of face value, traded price and corporate actions for listed companies.
- BSE India
The exchange's own company and corporate-action disclosures.
- MutualFundAdvisor.in editorial policy
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Amit Chadha is a Mutual Fund Distributor (ARN: 349461). The first conversation is free and educational.