Jio Financial Services shares drop 20% since debut: Unpacking the impact of index funds

Shares of Jio Financial Services Limited (JFSL) have recently been caught in a downward spiral, prompting investors to question the reasons behind this unexpected fall.

 Jio Financial Services Limited

JFS, the financial subsidiary carved out from Reliance Industries Ltd., made its debut on the stock market at Rs 265 per share. However, recent days have seen the stock facing a downward spiral, falling 20% since its introduction, with the company's market capitalisation dropping to Rs 1.36 lakh crore.


  • Jio Financial Services has seen a sharp 20% decline in its stock value since its market debut.

  • The selling pressure on JFS shares is a result of index funds being required to sell due to JFS not being part of major indices.

  • Investors await the upcoming annual general meeting (AGM) of RIL for insights into JFS's strategic plans and future direction.

Why is the JFS stock falling?

The primary reason behind this downturn for four consecutive days can be attributed to index funds. JFS is not part of major indices like the Sensex and Nifty, unlike its parent company, Reliance Industries. Consequently, index funds that hold shares of Reliance Industries received JFS shares in a 1:1 ratio. However, due to the absence of JFS in these indices, index funds are obligated to sell these shares, leading to a significant surge in selling pressure.

Removal from index postponed

BSE decided to defer the removal of JFS from S&P BSE Indices until August 29. The stock hitting consecutive lower circuit limits caused the index committee to postpone the removal.

Forced selling

The stock's recent events can be attributed to "forced selling," as index funds aim to offload shares before the stock exits the lower circuit and consequently the index. A staggering 14.5 crore shares are scheduled for sale, with approximately 8.5 crore shares already sold, along with an additional 20 lakh shares added today.

AGM anticipation

Investor attention is firmly fixed on the upcoming Reliance Industries Annual General Meeting (AGM) scheduled for August 28. Expectations run high as investors and analysts await strategic announcements for the freshly listed entity. Decisions about JFS and its alignment with its parent company through data-driven strategies could influence the company's trajectory.

What happens next?

Over the next ten trading days, JFS will be placed in the Trade-To-Trade (T2T) segment, allowing only delivery-based transactions while prohibiting intraday trading. Additionally, a 5% circuit filter will be imposed for the following ten sessions. Once this circuit constraint eases, investors will have the choice to retain or divest their holdings.

What should investors do?

Experts advise patience. While the conglomerate's history of innovation is well-regarded, investors are advised to wait for clearer insights into JFS's business strategy and primary focus areas.

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Also ReadJFS Shares Hit Lower Circuit: A Closer Look At Investor Sentiment, Business Strategy, And Recovery Prospects

Disclaimer: This article is intended for general information purposes only and should not be construed as insurance or investment or tax or legal advice. You should separately obtain independent advice when making decisions in these areas.


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