Jio Financial Services Stock Hits Back-To-Back Lower Circuits, Eroded Rs 23,700 Crore M-Cap In 3 Days; Buy?

There seems to be no breather in the dumping of newly listed Jio Financial Services shares as it hits lower circuits for the third consecutive day on Wednesday. In three days, the stock has eroded approximately Rs 23,700 crore of market value, however, it continues to be the third largest NBFC after the Bajaj twins namely Bajaj Finance and Bajaj Finserv. Institutional selling is most likely dragging Jio Financial Services on bruises. Does that mean, it is a good opportunity to buy? But for that, investors also need to understand the 'T' group under which Jio Financial stock is trading currently.

At the time of writing, Jio Financial Services stock hit yet another 5% lower circuits to Rs 227.25 apiece on BSE. Its market cap stood at Rs 1,44,378.38 crore, declining by Rs 23,700 crore in three days.

According to Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, JFSL's valuation is based on expectations surrounding its future growth potential and its 6.1% stake that it owns in RIL. The future growth prospects of JFSL are indeed bright since it can scale up its business hugely with its enormous connection with consumers and merchants. However 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.

Vijaykumar further explained that 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.

Jio Financial trades under BSE's 'T' group of securities which represents Securities which are settled on a trade-to-trade basis as a surveillance measure. They are also popularly known as trade-to-trade (T2T) segment. Generally, stocks are put under this group to tackle unnecessary speculation in the stock. To protect retail investors from erratic price movements, exchanges only allow delivery trades under the T2T segment, which means they are not offered for intraday trading. Trading in stocks under this group has a restriction of 5% circuit limits both on the lower and upper end.

Before listing on August 21, BSE notified that the equity shares of Jio Financial Services Ltd (Formerly known as Reliance Strategic Investments Limited) will be in the Trade-for-Trade segment for 10 trading days.

Hence, Jio Financial Services will have a 5% upper and lower circuits for ten trading sessions effective from August 21.

Also, on Tuesday, BSE said, " Since the stock has hit lower circuit limit for 2 consecutive days i.e., Monday, August 21, 2023, and Tuesday, August 22, 2023, the Index Committee has determined to postpone the removal of JFSL from all the S&P BSE Indices by another 3 days. JFSL will now be removed from all the S&P BSE Indices effective before the opening of trading on Tuesday, August 29, 2023."

The exclusion is because of its listing on Monday, August 21, 2023, due to its spin-off from its parent, Reliance Industries.

BSE said that the Asia Index Private Limited ("AIPL") is aware of the recent lower circuit hitting for JFSL. It also said, that should JFSL continue to hit the lower circuit in the next 2 days, the removal date will be deferred by another 3 days.

Jio Financial Services listed on August 21 at Rs 265 apiece, up by 1.20% from its fixed price of Rs 261.85 apiece in the pre-market price discovery session which was held last month.

The stock has been hitting back-to-back lower circuits since listing day.

Currently, Jio Financial Services' 52-week high and low is of Rs 278.20 apiece and Rs 227.25 apiece respectively.

What should investors do? Vijayakumar said, "Investors who are optimistic about the stock can buy from the market for delivery without any restrictions."