The continuous downward spiral of newly listed Jio Financial Services shares shows no signs of respite, as it plunges into the lower circuit for the third consecutive day this Wednesday. Over the span of just three days, the stock has shed over Rs 23,000 crore in market value. Surprisingly, despite this decline, it still holds the position of being the third-largest Non-Banking Financial Company (NBFC) after the formidable Bajaj Finance and Bajaj Finserv. The primary culprit behind this downward trajectory appears to be institutional selling, which is putting pressure on Jio Financial Services.
Now, the question arises: could this be an opportune moment to consider buying? However, potential investors must also familiarize themselves with the peculiar ‘T’ group classification under which Jio Financial stock is currently traded.
The valuation of Jio Financial Services is predicated on the anticipation of its future growth potential and its ownership of a substantial 6.1% stake in RIL (Reliance Industries Limited). In terms of future growth, Jio Financial has promising prospects, given its vast consumer and merchant network, suggesting substantial room for expansion. Nevertheless, the current drag on the share price stems from institutional selling in the short term, which has been accentuated by the stock’s placement in the T group.
The ‘T’ group designation is typically assigned to stocks expected to exhibit high volatility. In the case of Jio Financial, this move was made in anticipation of institutional selling as well as anticipated buying interest. The volatility witnessed in the stock following its listing justifies its placement in the T group. Jio Financial trades within BSE’s ‘T’ group of securities, denoting stocks settled on a trade-to-trade basis for surveillance purposes. These are commonly referred to as trade-to-trade (T2T) securities. Typically, stocks are placed in this group to curb speculative activities and protect retail investors from erratic price fluctuations. Under the T2T segment, only delivery trades are permitted, eliminating intraday trading. Moreover, there is a 5% circuit limit on both the lower and upper sides of the stock price.
Before its listing on August 21, BSE announced that Jio Financial Services Ltd (formerly known as Reliance Strategic Investments Limited) would be placed in the Trade-for-Trade segment for a duration of 10 trading days. Consequently, Jio Financial Services will experience a 5% price movement restriction, both upward and downward, for these ten trading sessions, starting from August 21.
Furthermore, on Tuesday, BSE disclosed that due to the stock hitting the lower circuit limit for two consecutive days on Monday, August 21, 2023, and Tuesday, August 22, 2023, the Index Committee has decided to defer JFSL’s removal from all the S&P BSE Indices by an additional 3 days. Consequently, Jio Financial Services will be excluded from all the S&P BSE Indices before the commencement of trading on Tuesday, August 29, 2023.
In summary, on Wednesday, Jio Financial Services’ shares concluded at Rs. 224.65, marking a 5% decline at NSE.