JFSL to exit S&P BSE indices including Sensex

Jio Financial Services Ltd’s shares will be removed from all S&P BSE indices, including Sensex, before trading opens on 1 September, according to a circular by the BSE on Thursday.

“Asia Index Pvt. Ltd via its notice announced that effective prior to the open of trading on Friday, 1 September, Jio Financial Services Ltd will be removed from all the S&P BSE indices,” said the circular.

Initially, JFSL was set to be excluded from the indices after 23 August after its listing on 21 August, following its spin-off from its parent, Reliance Industries Ltd. However, as the stock was locked in lower circuits for several days, the exclusion was postponed.

Over the past three days, the stock has consistently gained, reaching upper circuits and avoiding lower circuits. This signals its impending removal from the indices, including the BSE-30 indices.

On Thursday, JFSL started trading at ₹240.9 on the BSE, hitting an upper circuit and reaching an intraday high of ₹244.3. The stock ended the day at ₹233.65, up by 0.41%.

JFSL’s market capitalization at ₹1.48 trillion, makes it the third most-valued non-banking financial firm after Bajaj Finance and Bajaj Finserv.

A decision regarding JFSL’s removal from the Nifty indices is also expected in the coming week with index funds selling another 110 million shares, said Abhilash Pagaria, head of Nuvama Alternative & Quantitative Research.

The index funds, which received JFSL shares following the demerger from RIL, may be compelled to sell JFSL shares following its removal from the index.

The selling pressure could lead to volatility in the stock prices but is likely to get support in the ₹205-210 range. The downside support is thereby available, said Pagaria. The stock recently has seen good buying interest at these levels and even some large institutions are likely to have bought the stock.

The stock had hit 52-week lows of ₹205.15 on the BSE and ₹202.80 on the NSE on 25 August. These lows are also close to the book value and experts already had been expecting good buying interest coming at close to these levels.

The stock is also likely to be out of the T2T (trade-to-trade) segment by next week, said experts. Trade-to-trade is a stock segment where shares are traded only on a delivery basis.

Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services Ltd said that although the business currently is in the nascent stage, the company has big plans to build on consumer lending and Insurance business. “The stock is not likely to see too much downside,” he said.

Analyst valuations for JFSL have also been based on the 6.1% treasury stake in Reliance Industries Ltd (RIL) that Jio Financial Services owns.

Jio Financial Services aspires to be a full-services financial services company that would find robust support in its large capital base, experienced team, strong brand, group customer base, and technological capability, said analysts at Axis Capital.

The focus will be on digital lending, AMC (asset management company) and insurance businesses in the initial years, subject to regulatory approvals. It is also likely to benefit from the AAA rating of RIL which will help it lower the cost of funds and liabilities, they added. JFS will also benefit from the experience of existing players, which will help it shorten its maturity cycle, said analysts.