- Jio FS is not a part of indices and index funds which received the stock and will have to exit.
- Investors await announcements from Jio AGM to see if they should hold or sell the stock.
- Experts say that the next few quarters will give a clearer picture on how the business will shape up.
Why is the stock falling?
Reliance Industries is part of Sensex, Nifty and other major indices. Now, the index funds that track these indices that hold the RIL received Jio Financial Services on a 1:1 basis. However, since Jio FS is not a part of any of these indices, they will have to sell it as per regulations and that’s what’s leading to the selling pressure.
“Index funds cannot hold this stock and have to sell. As many as 14.5 crore such shares have to be sold and 8.5 crore seem to have been sold till yesterday, along with 20 lakh shares today. I think this selling will last for another two-three days,” Deepak Jasani, head of retail research at HDFC Securities told Business Insider India.
Jio FS removal postponed
On Tuesday, BSE postponed the removal of Jio FS from all the S&P BSE Indices to August 29. As the stock had hit lower circuit limits for two consecutive days, the index committee determined to postpone the removal of JFSL from all the S&P BSE Indices by another three days, said a BSE circular.
At a special price discovery session that was held last month, the stock was valued at ₹261.8 and it is currently trading below that at ₹224 per share. The current marketcap of Jio FS is at ₹1.44 lakh crore.
“Short-term selling pressure will continue looking at seller mood in the exchange which has increased multifold in the last three days,” said Prashanth Tapse, senior VP of research analyst at Mehta Equities.
What happens next
The stock will be in Trade-To-Trade (T2T) segment for 10 trading days — wherein stocks have to be bought only under the delivery method and are not eligible to be traded on an intraday basis. The stock will have a five percent circuit filter for the next ten trading sessions.
After the circuit opens, investors can take a call on whether to sell or hold the stock.
Eye on the AGM
The next event that the stock will have to watch for is the annual general meeting (AGM) of Reliance Industries that’s to be held on August 28. Investors and analysts alike hope that announcements will be made on the business plans of the newly listed entity.
“We stand neutral on the counter and wait and watch on the AGM development which can give a clear picture on the future outlook,” said Tapse.
As of now, there are a lot of expectations on Jio’s synergy benefits with the parent and data-empowered strategies to chart its parth. Experts say that currently the company has little business and will need to watch the next few quarters to see business will shape up.
“That’s when we will know if it can be valued as an internet company or an NBFC,” said Jasani.