Jio Financial Services stock hits lower circuit for fourth day
What's the story
Jio Financial Services Limited (JFSL) shares have hit the lower circuit for the fourth consecutive trading session.
The company's stocks are down by 4.99%. The fall is attributed to selling by both passive and active mutual funds.
The stock is in the T group of shares, which are actively traded but have certain restrictions. T group shares are not allowed for intraday trading.
Details
Index funds have to sell shares before exclusion from indices
Index funds have been selling JFSL shares to restructure their portfolios. According to market experts, the selling pressure is due to technical reasons.
These funds cannot hold JFSL shares once it is out of the indices. Therefore, they have to sell it per regulations.
JFSL's exclusion from the Sensex indices has been postponed to August 28 from August 23. However, the NSE is yet to announce the exclusion timeline.
Insight
The removal date can be deferred further
JFSL shares will be removed from all S&P BSE indices before the start of trading on Tuesday, August 29.
If the stock continues to hit the lower circuit for the next two sessions, the removal date will be extended by another three days.
Additionally, if the shares do not hit the lower circuit over two days but end in red on the third day, the exclusion will be deferred by another three sessions.
What Next?
JFSL could face increased selling pressure in the coming days
JFSL shares are likely to face increased selling pressure from index funds as Nifty50 and Sensex will exclude the stock.
The stock's removal from Nifty may alone lead to the selling of 90 million shares from passive funds. Those tracking Sensex are expected to sell another 55 million shares of JFSL.
Despite institutional selling, the outlook for JFSL shares remains positive. The company is expected to have a loan book of around $50 billion by March 2025.