Jio Financial Services hits back-to-back 5% lower circuit; why is it falling?

Jio Financial Services Limited’s shares have experienced a two-day streak of hitting the lower circuit. Today, the stock began trading at Rs 227.25 per share, marking a 5% decline from the previous day’s closing price of Rs 239.20 on the BSE. Throughout the day, the shares remained at the same price, with no buyers interested in buying the shares in the market. 

JFS, the financial subsidiary demerged from Reliance Industries Ltd, entered BSE trading at Rs 265 per share, representing a 1.2% premium over its determined price of Rs 261.85 on July 21. 

On its listing date, JFS had a market capitalization of Rs 1,68,362 crore, but today it stands at Rs 1,44,378 crore. Several market experts suggest that the stock might experience a period of decline before exhibiting signs of recovery. 

Are you worried, about why the stock is falling and continuously triggering lower circuit halts? Well, Reliance Industries is part of broader indices such as Sensex and Nifty. Recently, the index funds having Reliance Industries shares in their funds received Jio Financial Services shares in a 1:1 ratio. 

However, Jio Financial Services is not included in any of these indices. Consequently, in compliance with regulations, index funds are required to divest these shares, which is the driving force behind the current selling pressure. 

Due to regulatory restrictions, index funds are obligated to divest from this stock, leading to a selling requirement. Out of a total of 14.5 crore shares to be sold, approximately 8.5 crore shares were reportedly sold by yesterday, in addition to 20 lakh shares sold today. Deepak Jasani, who heads retail research at HDFC Securities, stated that this selling pressure is likely to persist for another two to three days. 

RIL AGM is going to happen on August 28, Investors and analysts alike hope that announcements will be made on the business plans of the newly listed entity. They are anticipating significant synergy benefits from Jio’s connection with the parent company and data-empowered strategies that will shape its path. 

For 10 trading days, the stock will be in the Trade-To-Trade (T2T) segment. Only delivery-based transactions are allowed, and intraday trading is prohibited. The stock will have a 5% circuit filter for the next ten sessions. After the circuit restriction ends, investors can choose to hold or sell the stock. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet, and is subject to changes. Please consult an expert before making related decisions.