Jio Financial Services’ shares, which were separated from Reliance Industries (RIL), experienced a consecutive second-day decline of 5 percent, triggering a halt in their removal from benchmark indices. Jio Financial’s current weight in Nifty50 and Sensex is around 1 percent.
Simultaneously, both BSE and NSE have confirmed the removal of Jio Financial from their indices on August 29, following the stock’s consecutive lower circuit triggers. In case the stock’s downward limit persists, the exclusion might be postponed to ensure ETFs have an orderly exit.
On the National Stock Exchange (NSE), it concluded at Rs 236.5, down from the prior day’s Rs 248.9.
Presently, Jio Financial’s valuation is Rs 1.5 trillion, reflecting a market value decrease of nearly Rs 16,000 crore. During a special price discovery event on July 20, the Mukesh Ambani-led company was appraised at Rs 1.66 trillion.
Market analysts suggest that the decrease in Jio Financial shares is due to various causes. One of them is market sentiment. They predict that exchange-traded funds (ETFs) and index funds linked to Nifty and Sensex will offload Jio Financial shares worth $400 million since holding the stock will no longer be obligatory. This is a normal procedural issue.
Additionally, Global Depository Receipt (GDR) holders of RIL are expected to sell shares worth $500 million. These investor groups received Jio Financial shares due to their ownership of RIL.
Even though the stock will be excluded from both the domestic benchmark indices, it nevertheless continues to be a part of global indices like Morgan Stanley Capital International and the Financial Times Stock Exchange, mitigating the downward pressure.
The anticipated mandatory selling might involve approximately 150 million shares, valued at about Rs 3,500 crore during the last closing. It is expected that as the Reliance annual general meeting (AGM) slated for August 28, the unveiling of a business roadmap could potentially ease the price pressure.
Due to Jio Financial’s limited operational commencement, analysts are grappling with establishing a fair stock value and are awaiting further signals from the company.
Some analysts question whether RIL can replicate its disruptive strategy in retail and telecommunications within the financial sector. The execution capabilities of Jio Financial will only become evident over time. They are monitoring the level of aggression in unsecured lending by Jio Financial to assess the impact on non-banking financial companies (NBFCs) and system-level leverage.
Furthermore, if Jio Financial attains the same ‘AAA’ rating as parent RIL, it could enjoy a significant advantage in terms of lower funding costs.
Amidst all these cues, how the stock performs today would be interesting.