Jio Financial Services to be excluded from NSE indices from 7-Sept-2023

In a recent development, Jio Financial Services Ltd, the demerged non-banking financial services unit of the Mukesh Ambani-led Reliance group, is set to be dropped from various NSE indices, including the Nifty 50, on September 7, 2023. This decision follows a series of events that have unfolded over the past few days, impacting the stock's performance and its inclusion in the indices.

Quick look in a Background

Earlier, NSE Indices Limited announced the inclusion of Jio Financial Services Limited (JIOFIN) in various indices, effective from July 20, 2023. This inclusion was a result of the demerger of the financial services business from Reliance Industries Limited (RELIANCE). Jio Financial Services was officially listed on August 21, 2023, at the National Stock Exchange Ltd. (NSE). However, recent developments have led to its impending removal from several NSE indices.

Exclusion from Indices

The decision to exclude Jio Financial Services from NSE indices, including Nifty 50, was made due to the stock not meeting the price band criteria on two consecutive trading days, specifically on September 4 and September 5, 2023. As per the index methodology, the Index Maintenance Sub-Committee (Equity) of NSE Indices Ltd. determined that JIOFIN should be removed from these indices, effective from September 7, 2023, with the final trading day being September 6, 2023. However, it's worth noting that if JIOFIN hits the price band on September 6, the exclusion will not be deferred further.

Impact on Indices and Passive Funds

The exclusion of Jio Financial Services from these indices has implications for passive funds tracking them. These funds will need to adjust their portfolios accordingly, with the adjustment scheduled for the final 30 minutes of trading on September 6, 2023. It is estimated that passive selling as a result of this adjustment could involve nearly 105 million shares, equivalent to $324 million. With the updated 20% price band, the exclusion process is expected to proceed smoothly, based on calculations by Nuvama Alternative Research. While BSE indices have already removed Jio Financial Services from their listings, it's important to note that MSCI and FTSE continue to include the stock in their respective indices.

Additional Insights

During the recent Annual General Meeting (AGM), Mukesh Ambani, Chairman of Reliance Industries, announced that Jio Financial Services would enter the insurance segment, offering a range of life, general, and health insurance products. This development coincided with a decline in Jio Financial Services' share price, which fell over 3% in early trade on September 6, 2023, following the news of its exclusion from NSE indices.

In anticipation of these changes, stock exchanges increased the price band for Jio Financial shares from 5% to 20% effective from September 4, 2023, to facilitate the exclusion process.

The removal of Jio Financial Services from various NSE indices marks a significant development in the financial landscape and underscores the impact of corporate restructuring and demergers on the stock market.
These developments highlight the dynamic nature of the financial markets and the importance of staying informed about the latest changes that can affect investments and portfolios.

In conclusion, After its listing, Jio Financial shares experienced a series of fluctuations. Initially, the stock encountered significant volatility, hitting four lower circuits of 5%, causing a decline in its value. However, Jio Financial Services managed to recover all the earlier losses after reaching a low of 202.80. As of its most recent closing, the stock concluded at a price of 255. Prior to the exclusion from the indices, the stock is trading in the red, signifying a decrease in its value.