Shares of Jio Financial Services (JFS) continued their fall for the third straight day as the stock hit the lower circuit of 5% on Wednesday as well. Jio Financial Services share price crashed another 5%, its daily circuit limit, to hit a new low of Rs 224.65, with a total market capitalization falling to less than Rs 1.45 lakh crore. The scrip has fallen a little over 15% since its listing at Rs 262 per share on NSE on Monday
According to share market analysts, the weakness in Jio Financial shares is driven by institutional selling and the outlook for the counter is positive. "The future growth prospects of JFS are indeed bright since it can scale up its business hugely with its enormous connection with consumers and merchants. But institutional selling is a drag on the share price in the near term. Since the stock is in the T segment, institutional selling is dragging the price down," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services
As per Apurva Sheth, Head of Market Perspectives & Research at SAMCO Securities, Jio Financial stock is under selling pressure as investors who would have bought the shares purely to benefit from demerger would like to book profits, if they get a higher price than their initial investment in erstwhile Reliance Industries (RIL)
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Jio Financial stock has been listed in the T-group segment of the bourses for the initial ten days of the listing. This means that intraday trading won’t be possible in the stock and there will be a circuit limit of 5% for buyers and sellers. This will restrict any major moves in the stock
"When a stock is expected to move to high volatility, it is put under trade-to-trade. The volatility in JFSL was expected since institutional selling was on the cards and interested buying too was expected. The volatility seen in the stock after listing justifies the decision to move the stock to the T segment. Investors who are optimistic about the stock can buy from the market for delivery without any restrictions," said VK Vijayakumar of Geojit Financial Services
The series of lower circuits has resulted in a delay in Jio Financial Services' exclusion from the stock indices, including BSE Sensex and Nifty50. The exclusion of the stock was slated to be deferred if it hit two straight days of the three-day period, and the stock was locked in the lower circuit for all three sessions. Asia Index Private Limited on Tuesday said its index committee has decided to postpone the removal of Jio Financial Services from all the S&P BSE indices
Originally, Jio Financial Services was scheduled to be excluded from stock indices from Thursday, August 24. With the stock hitting 5% lower circuit in all three sessions, Indian exchanges have delayed removal of the stock from benchmark indices till August 28, 2023. Analysts said the weakness on the counter is driven by institutional selling and that the outlook for the counter is positive
"Financial services is a business with several established players. JFSL comes with a solid parentage, technology and financial backing. But it will still take its own time to set up businesses and make a dent on the competition. Investors shouldn’t expect miracles in the short to medium term. Only investors who have a horizon beyond 5 years can consider holding on to the stock," said Apurva Sheth, Head of Market Perspectives & Research at SAMCO Securities
JFS is expected to continue witnessing more selling pressure as it has to compete with top 20 well-capitalised players who have demonstrated business models with an established customer base. "The fair value of JFS is likely to be around Rs 180. We believe investors shall await the management presentation expected on August 28, which may shed more light on the company's exact valuation and strategic direction. Overall we suggest retail investors and existing shareholders to wait for stabilisation of JFS," said Mahesh M Ojha, AVP - Research at Hensex Securities
Santosh Meena, Head of Research at Swastika Investmart said, "While the short-term outlook is uncertain due to a lack of clarity about business direction and profitability, the long-term outlook remains optimistic, supported by its robust pedigree and extensive network. The sector's bullish outlook further reinforces this perspective. Consequently, it's advisable for long-term investors to retain JFS shares, while short-term investors can stay away. Anticipate potential insights into JFS' future plans during the upcoming Reliance AGM."
Shrey Jain, Founder and CEO at SAS Online, believes that Jio Financial presents a promising and well-structured business model. He said, "In the short term, stock might be somewhat illiquid at present, which could lead to short-term volatility. However, medium and long-term prospects are robust, offering a positive outlook. Current shareholders are advised to retain their holdings, while those considering an investment can confidently make a purchase at this time."
Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Business Today. Investors should consult their financial advisors before taking any position