Jio Financial hits 5% lower circuit for 3rd session; exclusion from indices deferred

Shares of Jio Financial Services Limited (JFSL) hit their 5% lower circuit limit for the third straight session on Wednesday amid sustained selling by institutional investors. The shares of JFSL, a part of billionaire Mukesh Ambani-led Reliance Industries, have fallen 14.2% in the last three sessions against the discovered price of ₹261.85. According to analysts, the slump in JFSL share is driven by institutional selling, though the outlook for the country’s second-largest non-banking financial corporation (NBFC) firm remains positive.

On the NSE, JFSL opened lower and locked in the 5% lower circuit limit at ₹224.65 against the previous closing price of ₹236.45 on the BSE. Similarly, the Reliance Group stock touched a lower circuit limit of ₹227.25 on the BSE. On the volume front, a total of 29.65 lakh shares changed hands on the BSE and NSE, while the market capitalisation slipped to ₹1.44 lakh crore. The stock has lost ₹20,000 crore in market value in the last three sessions.

Given the sharp volatility in JFSL shares, stock exchanges have decided to postpone the exclusion of Jio Financial from key indices to August 29 from August 24. JFS was slated to be removed from all indices on August 24, three days (T+3) after its listing on August 21.

Asia Index Private Limited on Tuesday said its index committee has decided to postpone the removal of JFSL from all the S&P BSE indices by another three days as the stock hit its lower circuit limit for two straight days of the three-day period.

“JFSL will now be removed from all the S&P BSE indices effective prior to the opening of trading on Tuesday, August 29, 2023. Should JFSL continue to hit the lower circuit in the next two days, the removal date will be deferred by another three days,” Asia Index Pvt Ltd said in a release on Tuesday.

Further, if Jio Financial shares continue to hit lower circuits in the next 2 days, the exclusion date would be deferred by another 3 days. Adding to it, if JFSL shares do not hit the lower circuit limit on either of the next two days, but hit the circuit limit on the 3rd day, the removal of the stock from all the S&P BSE Indices will be deferred by another 3 days.

JFSL, a part of billionaire Mukesh Ambani-led conglomerate, was listed under a dummy ticker symbol on the BSE and the NSE on July 20, but trading was not allowed till its official listing on the exchanges. After a month, the stock was officially listed on the stock exchanges on August 21.

The counter has been placed in ''T'' group securities and put into the “Trade to Trade” segment by the exchanges to prevent too much volatility and price manipulation. In this stock segment, shares are traded only on a delivery basis, which means that the delivery of the stock can't be taken on the same day and are not eligible for intraday trading. The stock will be in the trade-to-trade segment for the next 10 trading days. 

What's fuelling sell-off in JFSL shares?

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, says the volatility in JFSL was expected since institutional selling was on the cards and interested buying was also expected. “The volatility seen in the stock after listing justifies the decision to move the stock to the Trade to Trade segment. Investors who are optimistic about the stock can buy from the market for delivery without any restrictions," he says.

Kranthi Bathini, Director Research, WealthMills, says, “JFSL shares have been coming down in the past three sessions consecutively after listing at ₹265 levels. The fair value of this company works around ₹200 range and this stock has come to the investors from Reliance Industries, which is a widely held stock in terms of market capitalisation. That is the reason some kind of profit booking the stock has been witnessing in the past three trading sessions.”

“Investors with a long term perspective can hold onto the stock and the fresh entries are advised in the range of ₹200 levels which is a fair range for this stock at this point in time. But this is the stock to watch in the coming quarters because it is coming from the pedigree of Reliance industries and its focus on the financial sector.”

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