Efficient Market Theory, pioneered by Eugene Fama, attracted researchers for analysis of market efficiency in developing market of India. Mishra (2005) considered the bonus issue announcement as the information which can affect the efficiency of the market and challenge the Efficient Market Theory. The effect of the information of bonus issue announcement is found to be positive on the market. The reason why it is so has been explained by many different hypotheses like signalling hypothesis (Foster and Vickrey 1978), cash distribution hypothesis (Ghosh and Woolridge 1988), liquidity hypothesis (Lakonishok and Lev 1987), and attention-getting hypothesis (Doran and Nachtmann 1988). This paper examines the effect of bonus announcements and the record date of bonus issue on the efficiency of the Indian stock market. Hypothesis test for the difference between the means of two samples method is used. Findings support the semi-strong form of market efficiency in case of most of the stocks. However, evidence of insider trading was observed in the sample companies that do not show efficiency. In case of record date the market is found to be efficient. A further analysis of bonus announcement effect on liquidity and effect of announcement with future record date uncovers evidences of inefficacy. In case-to-case company-specific market data analysis insider trading is evident.